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Exam 11: Measuring the Cost of Living

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Question 191

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Changes in the producer price index are often thought to be useful in predicting changes in

A) stock prices.
B) the consumer price index.
C) the unemployment rate.
D) the rate of output of goods and services.

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Question 192

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You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

A) sixty cents × today's CPI - 1962 CPI)
B) sixty cents × 1962 CPI - today's CPI)
C) sixty cents × today's CPI / 1962 CPI)
D) sixty cents × 1962 CPI / today's CPI)

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Question 193

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The real interest rate measures the change in dollar amounts.

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2004, then the CPI in 2004 was

The GDP deflator reflects the prices of all goods and services produced around the world, whereas the consumer price index reflects the prices of all goods and services bought by consumers.

Table 24-16 The table below lists annual consumer price index and inflation rates for a country over the period 2010-2013. Assume the year 2010 is used as the base year. -Refer to Table 24-16. Calculate the missing value that belongs in space A.

In general, if a consumer good is produced domestically and consumed domestically, an increase in its price will have which of the following effects?

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

The inflation rate you are likely to hear on the nightly news is calculated from

If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is

In the calculation of the CPI, books are given greater weight than magazines if

Which entity within the U.S. government is responsible for computing and reporting the CPI?

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will

Michael Jordan's rookie salary in 1984 was $550,000. The CPI in 1984 was 103.9, while the CPI in 2010 was 218.1. What is Michael Jordan's rookie salary in 2010 dollars?

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2013 was

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

Data from the Bureau of Labor Statistics show that the largest category of consumer spending is housing.

Table 24-3 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 4 pounds of pork and 3 bushels of corn. -Refer to Table 24-3. If 2012 is the base year, then the CPI for 2013 was

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

When a new good is introduced, consumers have more variety from which to choose, and this in turn increases the cost of maintaining the same level of economic well-being.