Question 1

During this year,nominal GDP in Syldavia was $720 billion and real GDP was $720 billion.The GDP price index in Syldavia in this year was

Accepted Answer

A)  0,because nominal GDP equalled real GDP.
B)  -1.
C)  720.
D)  720 billion.
E)  100.

Question 2

If the CPI is 170 at the beginning of the year and 181 at the end,and a bank is paying a nominal interest rate of 6 per cent,we see that

Accepted Answer

A)  the real interest rate is positive and is larger than 1 per cent.
B)  the real interest rate is equal to zero.
C)  the real interest rate is positive and is less than 1 per cent.
D)  the real interest rate is negative.
E)  the nominal interest rate is negative.

Question 3

The formula for the CPI is

Accepted Answer

A)  (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at next year's prices) × 100.
B)  (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices) × 100.
C)  (Cost of CPI market basket this year × Cost of CPI market basket at base period prices) ÷ 100.
D)  (Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current period prices) × 100.
E)  (Cost of CPI market basket this year × Cost of CPI market basket at base period prices) × 100.

Question 4

When the nominal price of a good increases over time,the real cost of buying the good

Accepted Answer

A)  decreases because income also increases over time.
B)  must increase.
C)  might increase,decrease or stay the same depending on how much the CPI changed.
D)  does not change because income also increases over time.
E)  might increase,decrease or stay the same depending on how much income changed.

Question 5

In constructing the CPI,the ABS has to deal with commodity substitution bias,which is defined as

Accepted Answer

A)  consumers' substitution of cheaper goods for goods whose prices increase.
B)  the bias from new goods being introduced that are more expensive than older goods.
C)  the bias that arises because the ABS changes the CPI market basket each month.
D)  consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores.
E)  the bias from quality changes in existing products that cause prices to increase.

Question 6

The ________ is the average hourly wage rate measured in current dollars,while the ________ is the average hourly rate measured in the dollars of a given reference base year.

Accepted Answer

A)  real wage rate;nominal wage rate
B)  real interest rate;nominal interest rate
C)  nominal interest rate;real interest rate
D)  inflation rate;real wage rate
E)  nominal wage rate;real wage rate

Question 7

If you get an 8 per cent increase in your nominal income,your real income

Accepted Answer

A)  definitely increases.
B)  increases if the inflation rate is more than or equal to 8 per cent.
C)  increases only if the inflation rate is more than 8 per cent.
D)  increases only if the inflation rate is less than 8 per cent.
E)  increases only if the inflation rate is equal to 8 per cent.

Question 8

-The data in the table above show the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2011.The CPI in 2012 is

Accepted Answer

A)  100.
B)  18.8
C)  118.8
D)  23.1
E)  123.1

Question 9

A ham and cheese sandwich at the local cafe costs $4.99 in 2005.If the CPI in 2005 was 90.0 and the CPI today is 121.0,the equivalent price for the ham and cheese sandwich today is

Accepted Answer

A)  $6.04.
B)  $5.29.
C)  $4.99.
D)  $6.71.
E)  $5.54.

Question 10

The Consumer Price Index (CPI) measures the changes in the

Accepted Answer

A)  prices paid by consumers and businesses for a fixed market basket of goods and services.
B)  quantities of a fixed market basket of goods produced by businesses.
C)  prices paid by all businesses for a fixed market basket of production resources.
D)  prices paid by consumers for a fixed market basket of consumer goods and services.
E)  lowest prices paid by consumers for a fixed market basket of consumer goods and services.

Question 11

Suppose the CPI in 1983 is 100 and the CPI this year is 172.These values for the CPI mean that

Accepted Answer

A)  inflation between the two years was 172 per cent.
B)  typically,a good whose price was $100 in 1983 had a price of $58 this year.
C)  typically,a good whose price was $172 in 1983 had a price of $100 this year.
D)  typically,a good whose price was $100 in 1983 had a price of $139 this year.
E)  typically,a good whose price was $100 in 1983 had a price of $172 this year.

Question 12

If we look at the nominal versus real wage rates paid to American presidents over time,we find that

Accepted Answer

A)  the real wage rate has steadily increased to $400,000 per year.
B)  George W.Bush is the highest paid according to real wage rates.
C)  George Washington was paid a higher real wage rate than Bill Clinton.
D)  George W.Bush's nominal wage is about equal to the average nominal wage paid all presidents.
E)  the nominal wage has increased and decreased at different times because of inflation.

Question 13

If the price of used cars rises,then the CPI will ________ and the GDP deflator will ________.

Accepted Answer

A)  not change;not change
B)  increase;increase by more than the CPI
C)  not change;increase
D)  increase;not change
E)  increase;increase

Question 14

If the average price of a barrel of oil was $35 in 1990,when the CPI was 114.7 and $55 in 2015 when the CPI was 229.6,then the real cost of a barrel of oil

Accepted Answer

A)  rose by 20 per cent during that period.
B)  rose by 57 per cent during that period.
C)  rose by 75.7 per cent during that period.
D)  fell by 57 per cent during that period.
E)  fell by 157 per cent during that period.

Question 15

In 2013,the reference base period for the CPI for the nation of Webot,a typical consumer spent $30 on potatoes and $150 on steak.If the price of steak is $15 and the price of potatoes is $1 then there are ________ units of steak and ________ units of potatoes in the CPI market basket.

Accepted Answer

A)  150;30
B)  10;30
C)  5;30
D)  30;150
E)  None of the above answers is correct.

Question 16

If the CPI decreases from one year to the next,then the inflation rate is

Accepted Answer

A)  above 100.
B)  negative.
C)  0.
D)  positive.
E)  below 100.

Question 17

In order to determine if the quantity of goods and services that an hour's work can buy has increased or decreased between 2000 and 2015,one should compare the

Accepted Answer

A)  2000 nominal wage with the 2015 nominal wage.
B)  2000 real wage with the 2015 real wage.
C)  2000 nominal wage with the 2015 real wage.
D)  2000 real wage with the 2015 nominal wage.
E)  2000 nominal wage with the 2015 nominal wage and the 2000 real wage with the 2015 real wage because both are important factors determining if workers can buy more or fewer goods with an hour's work.

Question 18

The difference between nominal and real is

Accepted Answer

A)  nominal is measured in current dollars and real is measured in dollars of a given year.
B)  real is measured in current dollars and nominal is measured in dollars of a given year.
C)  both nominal and real are measured with index numbers,only the nominal index is greater than 100 and the real index is less than 100.
D)  nominal is a number stated in dollars and real is stated with an index number.
E)  real is a number stated in dollars and nominal is stated with an index number.

Question 19

If the real interest rate is 5 per cent when the inflation rate is 4 per cent,the nominal interest rate is

Accepted Answer

A)  1 per cent.
B)  9 per cent.
C)  1.25 per cent.
D)  .80 per cent.
E)  20 per cent.

Question 20

If prices have decreased since the base period,then

Accepted Answer

A)  there is no way to adjust nominal GDP so that it equals real GDP.
B)  real GDP is smaller than nominal GDP.
C)  real GDP is larger than nominal GDP.
D)  real GDP is equal to nominal GDP.
E)  real GDP can no longer be compared to nominal GDP.

Exam 7: The Cpi and the Cost of Living

-The data in the table above show the consumption by families in a small (poor) economy.The families consume only salt and bread.The reference base period is 2011.The CPI in 2012 is

Correct AnswerverifiedShow Answer

When the nominal price of a good increases over time,the real cost of buying the good

Correct AnswerverifiedShow Answer

Suppose the CPI in 1983 is 100 and the CPI this year is 172.These values for the CPI mean that

Correct AnswerverifiedShow Answer

In order to determine if the quantity of goods and services that an hour's work can buy has increased or decreased between 2000 and 2015,one should compare the

Correct AnswerverifiedShow Answer

If the real interest rate is 5 per cent when the inflation rate is 4 per cent,the nominal interest rate is

Correct AnswerverifiedShow Answer

If prices have decreased since the base period,then

Correct AnswerverifiedShow Answer

The ________ is the average hourly wage rate measured in current dollars,while the ________ is the average hourly rate measured in the dollars of a given reference base year.

Correct AnswerverifiedShow Answer

If the average price of a barrel of oil was $35 in 1990,when the CPI was 114.7 and $55 in 2015 when the CPI was 229.6,then the real cost of a barrel of oil

Correct AnswerverifiedShow Answer

In 2013,the reference base period for the CPI for the nation of Webot,a typical consumer spent $30 on potatoes and $150 on steak.If the price of steak is $15 and the price of potatoes is $1 then there are ________ units of steak and ________ units of potatoes in the CPI market basket.

Correct AnswerverifiedShow Answer

If the CPI is 170 at the beginning of the year and 181 at the end,and a bank is paying a nominal interest rate of 6 per cent,we see that

Correct AnswerverifiedShow Answer

A ham and cheese sandwich at the local cafe costs $4.99 in 2005.If the CPI in 2005 was 90.0 and the CPI today is 121.0,the equivalent price for the ham and cheese sandwich today is

Correct AnswerverifiedShow Answer

If we look at the nominal versus real wage rates paid to American presidents over time,we find that

Correct AnswerverifiedShow Answer

If you get an 8 per cent increase in your nominal income,your real income

Correct AnswerverifiedShow Answer

The difference between nominal and real is

Correct AnswerverifiedShow Answer

If the CPI decreases from one year to the next,then the inflation rate is

Correct AnswerverifiedShow Answer

In constructing the CPI,the ABS has to deal with commodity substitution bias,which is defined as

Correct AnswerverifiedShow Answer

The Consumer Price Index (CPI) measures the changes in the

Correct AnswerverifiedShow Answer

If the price of used cars rises,then the CPI will ________ and the GDP deflator will ________.

Correct AnswerverifiedShow Answer

During this year,nominal GDP in Syldavia was $720 billion and real GDP was $720 billion.The GDP price index in Syldavia in this year was

Correct AnswerverifiedShow Answer

The formula for the CPI is

Correct AnswerverifiedShow Answer

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The is the average hourly wage rate measured in current dollars,while the is the average hourly rate measured in the dollars of a given reference base year.

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In 2013,the reference base period for the CPI for the nation of Webot,a typical consumer spent $30 on potatoes and $150 on steak.If the price of steak is $15 and the price of potatoes is $1 then there are units of steak and units of potatoes in the CPI market basket.

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If the price of used cars rises,then the CPI will and the GDP deflator will .

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