Question 1

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Accepted Answer

A)  $37,711.86.
B)  $49,906.02.
C)  $66,750.00.
D)  $112,711.86.E) C) and D)
F) A) and B)

Question 2

The problems with using the consumer price index as a measure of the cost of living are important because

Accepted Answer

A)  even the appearance of high rates of inflation cause voters to become disenchanted.
B)  politicians have manipulated the measurement problems to their advantage.
C)  many government programs use the CPI to adjust for changes in the overall level of prices.
D)  if the price level is overstated, consumers will be taken advantage of by sellers of consumer goods.E) A) and C)
F) C) and D)

Question 3

The largest sector in the consumer price index market basket is food and beverage purchases.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

Accepted Answer

A)  the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 3 percent.
B)  the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 4 percent.
C)  the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 2 percent.
D)  the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.E) None of the above
F) A) and B)

Question 5

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Accepted Answer

A)  rises and the cost of living increases.
B)  rises and the cost of living decreases.
C)  falls and the cost of living increases.
D)  falls and the cost of living decreases.E) All of the above
F) A) and B)

Question 6

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. 
-Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750. Then x, the consumer price index for 2011, has a value of

Accepted Answer

A)  184.0.
B)  185.8.
C)  187.5.
D)  189.4.E) None of the above
F) A) and C)

Question 7

The GDP deflator reflects the

Accepted Answer

A)  level of prices in the base year relative to the current level of prices.
B)  current level of prices relative to the level of prices in the base year.
C)  level of real output in the base year relative to the current level of real output.
D)  current level of real output relative to the level of real output in the base year.E) A) and D)
F) B) and C)

Question 8

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Accepted Answer

A)  12 to 15
B)  20 to 24
C)  30 to 35
D)  All of these changes produce the same rate of inflation.E) None of the above
F) A) and B)

Question 9

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

Accepted Answer

A)  $2.67 purchases today.
B)  $37.50 purchases today.
C)  $39.00 purchases today.
D)  $104.00 purchases today.E) A) and D)
F) None of the above

Question 10

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

Accepted Answer

A)  The consumer price index will decrease relatively more than will the GDP deflator.
B)  The consumer price index and the GDP deflator will decrease by the same amount.
C)  The consumer price index will decrease relatively less than will the GDP deflator.
D)  One cannot generalize about the decrease in the consumer price index relative to the decrease in the GDP deflator.E) A) and B)
F) A) and C)

Question 11

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Accepted Answer

A)  Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate.
B)  Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index.
C)  Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.
D)  Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.E) None of the above
F) All of the above

Question 12

A decrease in the price of domestically produced industrial robots will be reflected in

Accepted Answer

A)  both the GDP deflator and the consumer price index.
B)  neither the GDP deflator nor the consumer price index.
C)  the GDP deflator but not in the consumer price index.
D)  the consumer price index but not in the GDP deflator.E) B) and C)
F) A) and D)

Question 13

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. 
-Refer to Table 24-7. Which of the following scenarios is consistent with this statement? "The cost of living increased by 25 percent between 2009 and 2011."

Accepted Answer

A)  The price of a hot dog was $2.24 rather than $3.00 in 2009, with other prices in the table remaining fixed.
B)  The price of a hot dog was $4.07 rather than $3.63 in 2011, with other prices in the table remaining fixed..
C)  The price of a hamburger was $4.24 rather than $5.00 in 2009, with other prices in the table remaining fixed.
D)  The price of a hamburger was $5.96 rather than $5.61 in 2011, with other prices in the table remaining fixed.E) B) and C)
F) B) and D)

Question 14

Table 24-4
The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. 
-Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Accepted Answer

A)  80.8 in 2012, 100 in 2013, and 107.7 in 2014.
B)  80.5 in 2012, 100 in 2013, and 107.3 in 2014.
C)  247.5 in 2012, 307.5 in 2013, and 330 in 2014.
D)  210 in 2012, 260 in 2013, and 280 in 2014.E) B) and D)
F) A) and D)

Question 15

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $43,333.33 in five years to have kept pace with consumer price inflation.

Accepted Answer

A) True 
 B)False

Question 16

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Accepted Answer

A)  $17 more in his account, and his purchasing power has increased by $10.
B)  $30 more in his account, and his purchasing power has increased by $50.
C)  $40 more in his account, and his purchasing power has increased by $33.
D)  $50 more in his account, and his purchasing power has increased by $33.E) None of the above
F) B) and D)

Question 17

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

Accepted Answer

A)  -5 percent.
B)  -1 percent.
C)  5 percent.
D)  3.2 percent.E) A) and B)
F) C) and D)

Question 18

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Accepted Answer

A)  5.6 percent between the first and second years, and 7.7 percent between the second and third years.
B)  5.9 percent between the first and second years, and 8.3 percent between the second and third years.
C)  10 percent between the first and second years, and 15 percent between the second and third years.
D)  80 percent between the first and second years, and 95 percent between the second and third years.E) B) and C)
F) A) and B)

Question 19

Scenario 24-6
TOPICS:
Price levels
Inflation
KEYWORDS:
BLOOM'S: Application
CUSTOM ID:
016.24 - SAE - MANK08
Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period. 
-Refer to Table 24-14. Calculate the consumer price index for February and March.

Accepted Answer

85 in Febr...

Question 20

For which rate of inflation given below will the real interest rate be higher than the nominal interest rate?

Accepted Answer

A)  ​-0.5%
B)  ​0.2%
C)  ​0.5%
D)  ​1.5%E) A) and B)
F) B) and C)

Exam 24: Measuring the Cost of Living

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Correct Answer
verified

The largest sector in the consumer price index market basket is food and beverage purchases.

Correct Answer
verified

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

Correct Answer
verified

A decrease in the price of domestically produced industrial robots will be reflected in

Correct Answer
verified

Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Correct Answer
verified

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

Correct Answer
verified

For which rate of inflation given below will the real interest rate be higher than the nominal interest rate?

Correct Answer
verified

Correct Answer
verified
85 in Febr...
View Answer

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

Correct Answer
verified

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Correct Answer
verified

Correct Answer
verified

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

Correct Answer
verified

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Correct Answer
verified

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Correct Answer
verified

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750. Then x, the consumer price index for 2011, has a value of

Correct Answer
verified

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Correct Answer
verified

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Correct Answer
verified

The problems with using the consumer price index as a measure of the cost of living are important because

Correct Answer
verified

The GDP deflator reflects the

Correct Answer
verified

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $43,333.33 in five years to have kept pace with consumer price inflation.

Correct Answer
verified

Exam 24: Measuring the Cost of Living

Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266 in 2006. Dewey's 2001 salary in 2006 dollars is

Correct AnswerverifiedShow Answer

The largest sector in the consumer price index market basket is food and beverage purchases.

Correct AnswerverifiedShow Answer

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

Correct AnswerverifiedShow Answer

A decrease in the price of domestically produced industrial robots will be reflected in

Correct AnswerverifiedShow Answer

Table 24-4 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. -Refer to Table 24-4. If 2013 is the base year, then the consumer price index was

Correct AnswerverifiedShow Answer

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

Correct AnswerverifiedShow Answer

For which rate of inflation given below will the real interest rate be higher than the nominal interest rate?

Correct AnswerverifiedShow Answer

Correct Answerverified85 in Febr...View AnswerShow Answer

In general, if a consumer good is produced domestically and consumed domestically, a decrease in its price will have which of the following effects?

Correct AnswerverifiedShow Answer

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15, 20 to 24, or 30 to 35?

Correct AnswerverifiedShow Answer

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

Correct AnswerverifiedShow Answer

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,750. Then x, the consumer price index for 2011, has a value of

Correct AnswerverifiedShow Answer

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Correct AnswerverifiedShow Answer

Corey deposits $1,000 in a savings account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 1.7 percent. At the end of the year, Corey has

Correct AnswerverifiedShow Answer

The problems with using the consumer price index as a measure of the cost of living are important because

Correct AnswerverifiedShow Answer

The GDP deflator reflects the

Correct AnswerverifiedShow Answer

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $43,333.33 in five years to have kept pace with consumer price inflation.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
85 in Febr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified