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Exam 16: Measuring the Cost of Living

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Question 21

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List the five steps for calculating the consumer price index and inflation rate.

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1) Survey consumers to determine a fixed...

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Question 22

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Which of the following is not correct?

A) The U.S. economy has never experienced deflation.
B) Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate.
C) Since 1965, the U.S. economy has experienced rising consumer prices in most years.
D) During deflation, the real interest rate exceeds the nominal interest rate.

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Question 23

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When the relative price of a good decreases, consumers respond by buying

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

Scenario 24-6 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-6. Using 2011 as the base year, what is the CPI in each year?

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basket's cost was $80; in 2008, the basket's cost was $92; and in 2010, the basket's cost was $108. The base year must be

As long as prices are rising over time, then

The CPI and the GDP deflator

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 inflation rate for February.

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

The value of the consumer price index increased from 140 to 147 during 2006. Nathan opened a bank account at the beginning of 2006, and at the end of 2006 his account balance was $12,840. The purchasing power of Nathan's account increased by 2 percent during the year. We can conclude that Nathan opened his account with a deposit of $11,500 at the beginning of 2006.

Consumer price index = × 100.

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970. The CPI in 1970 was 38.8, while the CPI in 2010 was 218.1. What is the value of the Tooth Fairy's payment in 2010 dollars?

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?

If the CPI was 127 in 1972 and is 324 today, then $10 in 1972 purchased the same amount of goods and services as

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

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?

The producer price index measures the cost of a basket of goods and services

Scenario 24-4 Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. -Refer to Scenario 24-4. The Wrexington salary in Charlieville dollars is

If the inflation rate decreased from 3.33% to 2.90% between October and November, while the nominal interest rate increased from 4.75% to 4.80%, what is the real interest rate in November?