Question 1

Table 24-8
The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers.
 
-Refer to Table 24-8. The cost of the basket

Accepted Answer

A)   increased from 2013 to 2014 and increased from 2014 to 2015.
B)   increased from 2013 to 2014 and decreased from 2014 to 2015.
C)   decreased from 2013 to 2014 and increased from 2014 to 2015.
D)   decreased from 2013 to 2014 and decreased from 2014 to 2015.E) B) and C)
F) None of the above

Question 2

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 3

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 March.

Accepted Answer

The answer of Table 24-14
The table below lists the per...

Question 4

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

Accepted Answer

A)   $23.86 purchased in 1965.
B)   $32.47 purchased in 1965.
C)   $68.00 purchased in 1965.
D)   $419.12 purchased in 1965.E) None of the above
F) A) and B)

Question 5

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.E) All of the above
F) C) and D)

Question 6

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Accepted Answer

A) True 
 B)False

Question 7

A COLA automatically raises the wage when the CPI rises.

Accepted Answer

A) True 
 B)False

Question 8

An important difference between the GDP deflator and the consumer price index is that

Accepted Answer

A)   the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.
B)   the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
C)   the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.
D)   the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.E) A) and B)
F) A) and C)

Question 9

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

Accepted Answer

A) True 
 B)False

Question 10

Consumer price index =

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is correct?

Accepted Answer

A)   The consumer price index is a measure of the overall level of prices, whereas the GDP deflator is not a measure of the overall level of prices.
B)   If, in the year 2011, the consumer price index has a value of 123.50, then the inflation rate for 2011 must be 23.50 percent.
C)   Compared to the GDP deflator, the consumer price index is the more common gauge of inflation.
D)   The consumer price index and the GDP deflator reflect the goods and services bought by consumers equally well.E) None of the above
F) A) and B)

Question 12

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $55. The value of the CPI in 2016 was

Accepted Answer

A)   90.9.
B)   104.0.
C)   105.0.
D)   110.0.E) All of the above
F) A) and D)

Question 13

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) All of the above
F) A) and C)

Question 14

By far the largest category of goods and services in the CPI basket is

Accepted Answer

A)   housing.
B)   transportation.
C)   education & communication.
D)   food & beverages.E) B) and C)
F) None of the above

Question 15

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

Accepted Answer

A)   level of real GDP.
B)   ratio of consumption to GDP.
C)   ratio of net exports to GDP.
D)   standard of living.E) A) and B)
F) A) and C)

Question 16

When ranking movies by nominal box office receipts, what important fact is overlooked?

Accepted Answer

A)   More people go to movies now than in the past.
B)   There are no good substitutes for movies currently.
C)   Prices, including those for movie tickets, have been rising over time.
D)   Movies and DVD are complements.E) C) and D)
F) A) and B)

Question 17

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

Accepted Answer

A) True 
 B)False

Question 18

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Accepted Answer

A)   80 in Kansas City and 100 in Dallas
B)   125 in Kansas City and 150 in Dallas
C)   100 in Kansas City and 124.5 in Dallas
D)   100 in Kansas City and 140 in DallasE) C) and D)
F) A) and B)

Question 19

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Accepted Answer

A)   fails to measure all changes in the quality of goods.
B)   displays a housing bias.
C)   accounts for changes in prices of some goods, but prices of certain goods are assumed to remain constant.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 20

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   income biasE) All of the above
F) None of the above

Exam 6: Measuring the Cost of Living

Correct Answer
verified

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

Correct Answer
verified

By far the largest category of goods and services in the CPI basket is

Correct Answer
verified

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

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

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Correct Answer
verified

An important difference between the GDP deflator and the consumer price index is that

Correct Answer
verified

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Correct Answer
verified

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

Correct Answer
verified

Consumer price index =

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

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

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

When ranking movies by nominal box office receipts, what important fact is overlooked?

Correct Answer
verified

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $55. The value of the CPI in 2016 was

Correct Answer
verified

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. The cost of the basket

Correct Answer
verified

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Correct Answer
verified

A COLA automatically raises the wage when the CPI rises.

Correct Answer
verified

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Exam 6: Measuring the Cost of Living

Correct AnswerverifiedShow Answer

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

Correct AnswerverifiedShow Answer

By far the largest category of goods and services in the CPI basket is

Correct AnswerverifiedShow Answer

Data from the Bureau of Labor Statistics show that consumer spending on medical care is about equal to consumer spending on recreation and consumer spending on education and communication.

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

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

Correct AnswerverifiedShow Answer

An important difference between the GDP deflator and the consumer price index is that

Correct AnswerverifiedShow Answer

For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of the CPI is this situation most relevant?

Correct AnswerverifiedShow Answer

Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

Correct AnswerverifiedShow Answer

Consumer price index =

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

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

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

When ranking movies by nominal box office receipts, what important fact is overlooked?

Correct AnswerverifiedShow Answer

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $55. The value of the CPI in 2016 was

Correct AnswerverifiedShow Answer

Table 24-8 The table below relates to the economy of Mainland, where the typical consumer's market basket consists of 2 televisions and 300 hamburgers. -Refer to Table 24-8. The cost of the basket

Correct AnswerverifiedShow Answer

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

Correct AnswerverifiedShow Answer

A COLA automatically raises the wage when the CPI rises.

Correct AnswerverifiedShow Answer

The consumer price index tires to measure how much consumer incomes must rise in order to maintain a constant

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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