Question 1

A COLA automatically raises the wage when

Accepted Answer

A)   GDP increases.
B)   taxes increase.
C)   the consumer price index increases.
D)   the producer price index increases.E) A) and B)
F) A) and C)

Question 2

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Accepted Answer

A)   - 0.75 percent
B)   - 0.5 percent
C)   9.5 percent
D)   9.75 percentE) All of the above
F) A) and C)

Question 3

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

Accepted Answer

A)   106 to 112
B)   112 to 120
C)   118 to 126
D)   All of these changes produce the same rate of inflation.E) A) and B)
F) None of the above

Question 5

An increase in the price of dairy products produced domestically 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) A) and D)
F) A) and B)

Question 6

Jake loaned Elwood $5,000 for one year at a nominal interest rate of 10 percent. After Elwood repaid the loan in full, Jake complained that he could buy 4 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $5,000. From this, we can conclude that the rate of inflation during the year was

Accepted Answer

A)   -4 percent.
B)   4 percent.
C)   6 percent.
D)   14 percent.E) B) and D)
F) A) and B)

Question 7

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

Accepted Answer

A) True 
 B)False

Question 8

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)   $4.75 purchased in 1955.
B)   $20.00 purchased in 1955.
C)   $95.00 purchased in 1955.
D)   $500 purchased in 1955.E) A) and D)
F) None of the above

Question 9

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Accepted Answer

A)   $228.
B)   $238.
C)   $257.
D)   $264.E) All of the above
F) B) and C)

Question 10

In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP deflator.

Accepted Answer

A) True 
 B)False

Question 11

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Accepted Answer

A)   The CPI was 100 in 2003, 110 in 2004, and 105 in 2005.
B)   The CPI was 100 in 2003, 120 in 2004, and 135 in 2005.
C)   The CPI was 100 in 2003, 105 in 2004, and 130 in 2005.
D)   The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.E) None of the above
F) A) and D)

Question 12

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

Accepted Answer

A)   The CPI involves a base year; the GDP deflator does not involve a base year.
B)   The CPI can be used to compute the inflation rate; the GDP deflator cannot be used to compute the inflation rate.
C)   The CPI reflects the prices of goods and services produced domestically; the GDP deflator reflects the prices of all goods and services bought by consumers.
D)   The CPI reflects a fixed basket of goods and services; the GDP deflator reflects current production of goods and services.E) B) and C)
F) A) and D)

Question 13

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Accepted Answer

A)   $35,000.00.
B)   $46,666.67.
C)   $61,950.00
D)   $105,000.00.E) A) and C)
F) A) and B)

Question 14

An increase in the price of bread produced domestically 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) A) and B)
F) C) and D)

Question 15

To calculate the CPI, the Bureau of Labor Statistics uses

Accepted Answer

A)   the prices of all goods and services produced domestically.
B)   the prices of all final goods and services.
C)   the prices of all consumer goods.
D)   the prices of some consumer goods.E) A) and C)
F) All of the above

Question 16

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

Accepted Answer

A) True 
 B)False

Question 17

Table 6-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
 
-Refer to Table 6-12. Suppose the consumer price index is 15.5 percent higher in 2011 than in 2009. Then Will's food expenditures for 2010 in 2011 dollars amount to

Accepted Answer

A)   $6,352.
B)   $6,380.
C)   $6,426.
D)   $6,651.E) A) and C)
F) All of the above

Question 18

From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

Accepted Answer

A)   4.4 percent
B)   7.6 percent
C)   9.0 percent
D)   12.1 percentE) None of the above
F) A) and C)

Question 19

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?

Accepted Answer

A)   $0.83
B)   $2.25
C)   $2.50
D)   $3.00E) All of the above
F) A) and B)

Question 20

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) B) and C)
F) A) and D)

Exam 6: Measuring the Cost of Living

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Correct Answer
verified

Correct Answer
verified

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

Correct Answer
verified

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

Correct Answer
verified

Correct Answer
verified

An increase in the price of bread produced domestically will be reflected in

Correct Answer
verified

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Correct Answer
verified

In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP deflator.

Correct Answer
verified

Table 6-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 6-12. Suppose the consumer price index is 15.5 percent higher in 2011 than in 2009. Then Will's food expenditures for 2010 in 2011 dollars amount to

Correct Answer
verified

An increase in the price of dairy products produced domestically will be reflected in

Correct Answer
verified

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

Correct Answer
verified

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

Correct Answer
verified

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Correct Answer
verified

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Correct Answer
verified

The GDP deflator reflects the

Correct Answer
verified

To calculate the CPI, the Bureau of Labor Statistics uses

Correct Answer
verified

A COLA automatically raises the wage when

Correct Answer
verified

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Correct Answer
verified

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Correct Answer
verified

From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

Correct Answer
verified

Exam 6: Measuring the Cost of Living

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?

Correct AnswerverifiedShow Answer

It is possible to observe a positive nominal interest rate together with a negative real interest rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the price of bread produced domestically will be reflected in

Correct AnswerverifiedShow Answer

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

Correct AnswerverifiedShow Answer

In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP deflator.

Correct AnswerverifiedShow Answer

Table 6-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 6-12. Suppose the consumer price index is 15.5 percent higher in 2011 than in 2009. Then Will's food expenditures for 2010 in 2011 dollars amount to

Correct AnswerverifiedShow Answer

An increase in the price of dairy products produced domestically will be reflected in

Correct AnswerverifiedShow Answer

Which of the following changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124?

Correct AnswerverifiedShow Answer

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

Correct AnswerverifiedShow Answer

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

Correct AnswerverifiedShow Answer

The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

The GDP deflator reflects the

Correct AnswerverifiedShow Answer

To calculate the CPI, the Bureau of Labor Statistics uses

Correct AnswerverifiedShow Answer

A COLA automatically raises the wage when

Correct AnswerverifiedShow Answer

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

Correct AnswerverifiedShow Answer

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

Correct AnswerverifiedShow Answer

From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was the inflation rate for medical care?

Correct AnswerverifiedShow Answer

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