Question 1

Table 24-15
The table below lists the prices of chips and salsa for the months of October, November, and December. Assume that the typical consumer buys 8 bags of chips and 4 jars of salsa each month, and that October is the base period.
 
-Refer to Table 24-15. Calculate the inflation rate for December.

Accepted Answer

The answer of Table 24-15
The table below lists the prices...

Question 2

Table 24-2
The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans.
 
-Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Accepted Answer

A)   95.7.
B)   100.0.
C)   90.0.
D)   213.6.E) A) and B)
F) A) and C)

Question 3

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Accepted Answer

A)   $40,000.
B)   $44,100.
C)   $37,838.
D)   $40,091.E) A) and B)
F) A) and C)

Question 4

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 2 percent.

Accepted Answer

A) True 
 B)False

Question 5

The economy's inflation rate is the

Accepted Answer

A)   price level in the current period.
B)   change in the price level from the previous period.
C)   change in the gross domestic product from the previous period.
D)   percentage change in the price level from the previous period.E) All of the above
F) A) and B)

Question 6

For an imaginary economy, the value of the consumer price index was 138.75 in 2016, and the inflation rate was 10 percent between 2015 and 2016. The consumer price index in 2015 was

Accepted Answer

A)   126.1.
B)   128.8.
C)   148.8.
D)   152.6.E) None of the above
F) B) and C)

Question 7

Table 24-3
The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn.
 
-Refer to Table 24-3. If 2012 is the base year, then the CPI for 2013 was

Accepted Answer

A)   100.0.
B)   116.0.
C)   132.8.
D)   154.0.E) A) and B)
F) All of the above

Question 8

In the CPI, goods and services are weighted according to

Accepted Answer

A)   how long a market has existed for each good or service.
B)   the extent to which each good or service is regarded by the government as a necessity.
C)   how much consumers buy of each good or service.
D)   the number of firms that produce and sell each good or service.E) A) and C)
F) A) and D)

Question 9

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates. From this you conclude

Accepted Answer

A)   there were serious episodes of deflation in the time frame represented on the graph.
B)   consumer prices were always rising in the time frame represented on the graph.
C)   the economy never experienced a recession in the time frame represented on the graph.
D)   GDP was always increasing for the time frame represented on the graph.E) None of the above
F) B) and C)

Question 10

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

Accepted Answer

A)   $3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
B)   $3.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
C)   $4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
D)   $4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.E) All of the above
F) A) and B)

Question 11

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent.

Accepted Answer

A) True 
 B)False

Question 12

The CPI was 96 in 1982, and the CPI was 230 in 2012. How much money would you have needed in 2012 in order to buy what you could have bought with $500 in 1982?

Accepted Answer

A)   $208.96
B)   $1,197.92
C)   $697.92
D)   $1,697.92E) A) and B)
F) A) and C)

Question 13

Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-5. What are the prices of books, CDs, and DVDs in 2009?

Accepted Answer

In 2009, books are $...

Question 14

Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods, X and Y, which are bought in quantities Qx and Qy, and sold at prices of Px and Py.

Accepted Answer

The answer of Write the formula for computing the cost...

Question 15

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below.
 
-Refer to Table 24-13. To the nearest dollar, how much is Olivia's 2010 clothing expenditure in 2011 dollars?

Accepted Answer

A)   $1,683
B)   $1,778
C)   $1,800
D)   $3,600E) None of the above
F) A) and B)

Question 16

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

Accepted Answer

A)   shelter.
B)   fuel and other utilities.
C)   household furnishings and operation.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 17

When looking at a graph of nominal and real interest rates you notice the graph for nominal rates and the graph for real rates cross each other many times. From this you conclude

Accepted Answer

A)   consumer prices sometimes rose and sometimes fell in the time frame represented on the graph.
B)   consumer prices were always rising in the time frame represented on the graph.
C)   the economy never experienced a recession in the time frame represented on the graph.
D)   GDP was always increasing for the time frame represented on the graph.E) A) and B)
F) All of the above

Question 18

Changes in the consumer price index are useful in predicting changes in the producer price index.

Accepted Answer

A) True 
 B)False

Question 19

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

Accepted Answer

A)   the CPI is easier to measure.
B)   the CPI is calculated more often than the GDP deflator is.
C)   the CPI better reflects the goods and services bought by consumers.
D)   the GDP deflator cannot be used to gauge inflation.E) All of the above
F) A) and B)

Question 20

Suppose that the price of one ear of corn was $0.05 in 1920, that the CPI in 1920 was 10, and that in 1990 the CPI was 180. What is the price of a 1920 ear of corn in 1990 dollars?

Accepted Answer

The price of a 1920 ...

Exam 6: Measuring the Cost of Living

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Correct Answer
verified

Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods, X and Y, which are bought in quantities Qx and Qy, and sold at prices of Px and Py.

Correct Answer
verified

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

Correct Answer
verified

For an imaginary economy, the value of the consumer price index was 138.75 in 2016, and the inflation rate was 10 percent between 2015 and 2016. The consumer price index in 2015 was

Correct Answer
verified

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates. From this you conclude

Correct Answer
verified

The economy's inflation rate is the

Correct Answer
verified

When looking at a graph of nominal and real interest rates you notice the graph for nominal rates and the graph for real rates cross each other many times. From this you conclude

Correct Answer
verified

Correct Answer
verified

Suppose that the price of one ear of corn was $0.05 in 1920, that the CPI in 1920 was 10, and that in 1990 the CPI was 180. What is the price of a 1920 ear of corn in 1990 dollars?

Correct Answer
verified
The price of a 1920 ...
View Answer

Correct Answer
verified
In 2009, books are $...
View Answer

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2012 is the base year, then the CPI for 2013 was

Correct Answer
verified

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Correct Answer
verified

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct Answer
verified

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

Correct Answer
verified

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 2 percent.

Correct Answer
verified

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below. -Refer to Table 24-13. To the nearest dollar, how much is Olivia's 2010 clothing expenditure in 2011 dollars?

Correct Answer
verified

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent.

Correct Answer
verified

The CPI was 96 in 1982, and the CPI was 230 in 2012. How much money would you have needed in 2012 in order to buy what you could have bought with $500 in 1982?

Correct Answer
verified

In the CPI, goods and services are weighted according to

Correct Answer
verified

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

Correct Answer
verified

Exam 6: Measuring the Cost of Living

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

Correct AnswerverifiedShow Answer

Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods, X and Y, which are bought in quantities Qx and Qy, and sold at prices of Px and Py.

Correct AnswerverifiedShow Answer

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

Correct AnswerverifiedShow Answer

For an imaginary economy, the value of the consumer price index was 138.75 in 2016, and the inflation rate was 10 percent between 2015 and 2016. The consumer price index in 2015 was

Correct AnswerverifiedShow Answer

When looking at a graph of nominal and real interest rates you notice that nominal rates always lie above real rates. From this you conclude

Correct AnswerverifiedShow Answer

The economy's inflation rate is the

Correct AnswerverifiedShow Answer

When looking at a graph of nominal and real interest rates you notice the graph for nominal rates and the graph for real rates cross each other many times. From this you conclude

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that the price of one ear of corn was $0.05 in 1920, that the CPI in 1920 was 10, and that in 1990 the CPI was 180. What is the price of a 1920 ear of corn in 1990 dollars?

Correct AnswerverifiedThe price of a 1920 ...View AnswerShow Answer

Correct AnswerverifiedIn 2009, books are $...View AnswerShow Answer

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2012 is the base year, then the CPI for 2013 was

Correct AnswerverifiedShow Answer

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

Correct AnswerverifiedShow Answer

Changes in the consumer price index are useful in predicting changes in the producer price index.

Correct AnswerverifiedShow Answer

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

Correct AnswerverifiedShow Answer

Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 7 percent during the year the money was deposited, then Bob's purchasing power has increased by 2 percent.

Correct AnswerverifiedShow Answer

Table 24-13. Olivia's expenditures on clothing for three consecutive years, along with some values for the CPI, are presented in the table below. -Refer to Table 24-13. To the nearest dollar, how much is Olivia's 2010 clothing expenditure in 2011 dollars?

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent.

Correct AnswerverifiedShow Answer

The CPI was 96 in 1982, and the CPI was 230 in 2012. How much money would you have needed in 2012 in order to buy what you could have bought with $500 in 1982?

Correct AnswerverifiedShow Answer

In the CPI, goods and services are weighted according to

Correct AnswerverifiedShow Answer

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

Correct AnswerverifiedShow Answer

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The price of a 1920 ...
View Answer

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In 2009, books are $...
View Answer

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