Exam 21: Measuring the Cost of Living

If the price of the market basket of goods in a country for the base year of 2013 was €20,000 and the price of the same basket had risen to €22,000 by 2014, the CPI for 2014.

The CPI will be most influenced by a 10 per cent increase in the price of which of the following consumption categories?

The GDP deflator differs from the CPI because the GDP deflator includes goods a country __________, while the CPI includes goods the country __________.

An increase in the price of imported cameras is captured by the Consumer Prices Index (CPI) but not by the GDP deflator.

Which of the following answers would accurately describe the bias in the CPI resulting from the fact that oil prices suddenly increase?

The "base year" in a price index is the benchmark year against which other years are compared.

If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected,

When the inflation rate ends up being lower than expected,

When borrowing money to purchase a car, Roberto has the choice between a fixed nominal interest rate and adjustable nominal interest rate loan. Typically the adjustable rate loans start with a lower rate than the fixed rate loan. Given that, Roberto would probably want to borrow money at the higher fixed rate when he expects the

Why does the GDP deflator give a different rate of inflation than the CPI?

The table shows the prices and the quantities consumed in Carnivore Country. The base year is 2013. This means that 2013 is the year the typical basket was determined so the quantities consumed in 2013 are the only quantities needed to calculate the CPI in each year. ? Table Year Price of beef Quantity of beef Price of pork Quantity of pork 2013 2.00 100 1.00 100 2014 2.50 90 0.90 120 2015 2.75 105 1.00 130 Refer to the table above. What are the values of the CPI in 2013, 2014, and 2015, respectively?

Substitution bias

Why will individual shoppers face different inflation rates?

Suppose your income rises from €19,000 to €31,000 while the CPI rises from 122 to 169. Your standard of living has likely

The CPI is used to

If inflation is 8 per cent and the real interest rate is 3 per cent, then the nominal interest rate must be

If the Consumer Prices Index (CPI) rises at 5 per cent per year, then every individual in the country needs exactly a 5 per cent increase in their income for their standard of living to remain constant.

The "basket" on which the CPI is based is composed of

If the CPI has a value of 115 today and the base year is 2014, then consumer prices have

Which item would receive the least weight in the CPI?