Question 1

Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
-Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is

Accepted Answer

A)   $0.05.
B)   $0.53.
C)   $0.73.
D)   $2.00.E) A) and C)
F) A) and D)

Question 2

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

Accepted Answer

A)   the GDP deflator and the CPI will both increase.
B)   the GDP deflator will increase and the CPI will be unchanged.
C)   the GDP deflator will be unchanged and the CPI will increase.
D)   the GDP deflator and the CPI will both be unchanged.E) A) and B)
F) C) and D)

Question 3

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

Accepted Answer

A)   very high.
B)   high.
C)   low, but never negative.
D)   low, and in some years they were negative.E) B) and D)
F) B) and C)

Question 4

If the price of Spanish olives imported into the United States decreases, then

Accepted Answer

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

Question 5

A decrease in the price of large tractors imported into the United States from Russia

Accepted Answer

A)   leaves the GDP deflator unchanged but decreases the consumer price index.
B)   decreases the GDP deflator but leaves the consumer price index unchanged.
C)   decreases both the GDP deflator and the consumer price index.
D)   leaves both the GDP deflator and the consumer price index unchanged.E) A) and B)
F) A) and C)

Question 6

The introduction of a new good

Accepted Answer

A)   increases the cost of maintaining the same level of economic well-being.
B)   decreases the cost of maintaining the same level of economic well-being.
C)   has no impact on the cost of maintaining the same level of economic well-being.
D)   may increase or decrease the cost of maintaining the same level of economic well-being, depending on how expensive the new good is.E) B) and C)
F) A) and B)

Question 7

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

Accepted Answer

The answer of If the CPI increased from 215 to...

Question 8

Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

Accepted Answer

A)   the Los Angeles price index
B)   the energy price index
C)   the producer price index
D)   the stock price indexE) A) and D)
F) B) and C)

Question 9

Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct?

Accepted Answer

A)   The economy experienced inflation between 2004 and 2005 and between 2005 and 2006.
B)   The inflation rate was positive between 2004 and 2005, and it was negative between 2005 and 2006.
C)   The inflation rate was higher between 2005 and 2006 than it was between 2004 and 2005.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 10

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. Suppose Olivia's 2009 clothing expenditure in 2010 dollars amounts to $1,440. Then X, the consumer price index for 2009, has a value of

Accepted Answer

A)   120.
B)   130.
C)   140.
D)   150.E) B) and C)
F) A) and D)

Question 11

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

Question 12

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was

Accepted Answer

A)   97.14.
B)   100.10.
C)   102.94.
D)   109.38.E) B) and D)
F) B) and C)

Question 13

For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of

Accepted Answer

A)   food away from home.
B)   alcoholic beverages.
C)   both food away from home and alcoholic beverages.
D)   neither food away from home nor alcoholic beverages because these are included in the recreation category of consumer spending.E) A) and C)
F) A) and D)

Question 14

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. If the base year is 2009, then the economy's inflation rate is

Accepted Answer

A)   10 percent in 2010 and 6.36 percent in 2011.
B)   10 percent in 2010 and 17 percent in 2011.
C)   9.2 percent in 2010 and 6 percent in 2011.
D)   8.22 percent in 2010 and 5 percent in 2011.E) A) and B)
F) None of the above

Question 15

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

Accepted Answer

A)   10 percent inflation between years 1 and 2, and 5 percent inflation between years 2 and 3.
B)   10 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.
C)   11.1 percent inflation between years 1 and 2, and 5 percent inflation between years 2 and 3.
D)   11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.E) A) and B)
F) B) and C)

Question 16

Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.
 
-Refer to Table 24-6. The cost of the basket

Accepted Answer

A)   increased from 2009 to 2010 and increased from 2010 to 2011.
B)   increased from 2009 to 2010 and decreased from 2010 to 2011.
C)   decreased from 2009 to 2010 and increased from 2010 to 2011.
D)   decreased from 2009 to 2010 and decreased from 2010 to 2011.E) None of the above
F) A) and C)

Question 17

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. Using 2010 as the base year, what is the inflation rate in 2010?

Accepted Answer

The inflat...

Question 18

An increase in the price of Irish whiskey imported into the United States will be reflected in

Accepted Answer

A)   both the U.S. GDP deflator and the U.S. CPI.
B)   neither the U.S. GDP deflator nor the U.S. CPI.
C)   the U.S. GDP deflator, but not the U.S. CPI.
D)   the U.S. CPI, but not the U.S. GDP deflator.E) None of the above
F) B) and D)

Question 19

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

Question 20

Suppose the quality of beef changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be least severe?

Accepted Answer

A)   The quality of beef deteriorates and beef becomes more expensive relative to other goods.
B)   The quality of beef deteriorates and beef becomes less expensive relative to other goods.
C)   The quality of beef improves and beef becomes more expensive relative to other goods.
D)   The quality of beef improves and the price of beef relative to other prices remains unchanged.E) B) and D)
F) A) and B)

Exam 6: Measuring the Cost of Living

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The inflat...
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Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 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

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

Correct Answer
verified

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. If the base year is 2009, then the economy's inflation rate is

Correct Answer
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For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of

Correct Answer
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The introduction of a new good

Correct Answer
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A decrease in the price of large tractors imported into the United States from Russia

Correct Answer
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Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

Correct Answer
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Correct Answer
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An increase in the price of Irish whiskey imported into the United States will be reflected in

Correct Answer
verified

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

Correct Answer
verified

Correct Answer
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Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is

Correct Answer
verified

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

Correct Answer
verified

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

Correct Answer
verified

Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct?

Correct Answer
verified

Suppose the quality of beef changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be least severe?

Correct Answer
verified

If the price of Spanish olives imported into the United States decreases, then

Correct Answer
verified

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. The cost of the basket

Correct Answer
verified

Exam 6: Measuring the Cost of Living

Correct AnswerverifiedThe inflat...View AnswerShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 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

If the CPI increased from 215 to 218 between the years 2012 and 2013, while the nominal interest rate increased from 3.25% to 3.80%, what is the real interest rate in 2013?

Correct AnswerverifiedShow Answer

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. If the base year is 2009, then the economy's inflation rate is

Correct AnswerverifiedShow Answer

For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of

Correct AnswerverifiedShow Answer

The introduction of a new good

Correct AnswerverifiedShow Answer

A decrease in the price of large tractors imported into the United States from Russia

Correct AnswerverifiedShow Answer

Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the price of Irish whiskey imported into the United States will be reflected in

Correct AnswerverifiedShow Answer

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Scenario 24-2 The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. -Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is

Correct AnswerverifiedShow Answer

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

Correct AnswerverifiedShow Answer

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

Correct AnswerverifiedShow Answer

Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose the quality of beef changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be least severe?

Correct AnswerverifiedShow Answer

If the price of Spanish olives imported into the United States decreases, then

Correct AnswerverifiedShow Answer

Table 24-6 The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. -Refer to Table 24-6. The cost of the basket

Correct AnswerverifiedShow Answer

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The inflat...
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