Question 1

Which of the following agencies calculates the CPI?

Accepted Answer

A)  the National Price Board
B)  the Department Of Weight and Measurements
C)  the Bureau of Labor Statistics
D)  the Congressional Budget Office

Question 2

When the consumer price index is computed, the base year is always the first year among the years being considered.

Accepted Answer

A) True 
 B)False

Question 3

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?

Accepted Answer

A)  substitution bias and introduction of new goods
B)  introduction of new goods and unmeasured quality change
C)  substitution bias and unmeasured quality change
D)  income bias and substitution bias

Question 4

The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

The price index that measures the cost of a basket of goods and services bought by firms is called the

Accepted Answer

A)  industrial price index.
B)  producer price index.
C)  core price index.
D)  GDP deflator.

Question 7

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Accepted Answer

A) True 
 B)False

Question 8

Table 11-4
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.   Year  Price of  Meat  Price of a  Tryy 2004$3 per pound $22005$1 per pound $72006$4 per pound $5\begin{array} { | c | c | c } 	ext { Year } & \begin{array} { c } 	ext { Price of } \	ext { Meat }\end{array} & \begin{array} { c } 	ext { Price of a } \	ext { Tryy }\end{array} \\hline 2004 & \$ 3 	ext { per pound } & \$ 2 \\hline 2005 & \$ 1 	ext { per pound } & \$ 7 \\hline 2006 & \$ 4 	ext { per pound } & \$ 5 \\hline\end{array} Year 200420052006​ Price of  Meat ​$3 per pound $1 per pound $4 per pound ​ Price of a  Tryy ​$2$7$5​​ 
-Refer to Table 11-4. The cost of the basket in 2006 was

Accepted Answer

A)  $9.
B)  $130.
C)  $140.
D)  $270.

Question 9

The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.

Accepted Answer

A) True 
 B)False

Question 10

Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa's purchasing power

Accepted Answer

A)  did not change if the inflation rate was 20 percent.
B)  decreased if the inflation rate was -5 percent.
C)  increased if the inflation rate was 22 percent.
D)  More than one of the above is correct.

Question 11

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

Accepted Answer

A)  substitution bias.
B)  product-improvement bias.
C)  introduction of new goods.
D)  unmeasured quality change.

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

The consumer price index was 225 in 2008 and 232.2 in 2009. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Accepted Answer

A)  1.6 percent
B)  3.3 percent
C)  5.1 percent
D)  7.4 percent

Question 15

Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct?

Accepted Answer

A)  The newspaper editorial is correct under all circumstances.
B)  The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI.
C)  The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI
D)  The newspaper editorial is incorrect under all circumstances.

Question 16

Which of the following is correct?

Accepted Answer

A)  The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers.
B)  The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.
C)  The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers.
D)  The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

Question 17

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.

Question 18

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007, what would the consumer price index value be in 2008?

Accepted Answer

A)  192
B)  208
C)  209
D)  217

Question 19

Persistent increases in the overall level of prices have been the norm.

Accepted Answer

A) True 
 B)False

Question 20

The CPI differs from the GDP deflator in that

Accepted Answer

A)  the CPI is a price index, while the GDP deflator is an inflation index.
B)  substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.
C)  increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.
D)  increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.

Exam 11: Measuring the Cost of Living

The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.

Correct Answer
verified

Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa's purchasing power

Correct Answer
verified

Which of the following agencies calculates the CPI?

Correct Answer
verified

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007, what would the consumer price index value be in 2008?

Correct Answer
verified

Correct Answer
verified

Persistent increases in the overall level of prices have been the norm.

Correct Answer
verified

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

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

The consumer price index was 225 in 2008 and 232.2 in 2009. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Correct Answer
verified

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

Correct Answer
verified

The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

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

When the consumer price index is computed, the base year is always the first year among the years being considered.

Correct Answer
verified

The price index that measures the cost of a basket of goods and services bought by firms is called the

Correct Answer
verified

The GDP deflator reflects the

Correct Answer
verified

The CPI differs from the GDP deflator in that

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

Exam 11: Measuring the Cost of Living

The Bureau of Labor Statistics surveys consumers to determine a fixed basket of goods.

Correct AnswerverifiedShow Answer

Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa's purchasing power

Correct AnswerverifiedShow Answer

Which of the following agencies calculates the CPI?

Correct AnswerverifiedShow Answer

Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The nominal interest rate for a consumer loan lasting from 2007 to 2008 is 8.5 percent and the real interest rate is 4.5 percent. If the consumer price index was 200 in 2007, what would the consumer price index value be in 2008?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Persistent increases in the overall level of prices have been the norm.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The consumer price index was 225 in 2008 and 232.2 in 2009. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?

Correct AnswerverifiedShow Answer

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

Correct AnswerverifiedShow Answer

The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.

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

When the consumer price index is computed, the base year is always the first year among the years being considered.

Correct AnswerverifiedShow Answer

The price index that measures the cost of a basket of goods and services bought by firms is called the

Correct AnswerverifiedShow Answer

The GDP deflator reflects the

Correct AnswerverifiedShow Answer

The CPI differs from the GDP deflator in that

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

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