Question 1

Which problem in the construction of the CPI is the creation of the mobile phone most relevant to?

Accepted Answer

A)  substitution bias 
B)  introduction of new goods 
C)  unmeasured quality change 
D)  income bias 
A)  substitution bias 
B)  introduction of new goods 
C)  unmeasured quality change 
D)  income bias

Question 2

The Canadian income tax system is indexed to the CPI.

Accepted Answer

A) True 
 B)False

Question 3

In 1949, the city of Sherbrooke, Quebec, built a hospital for about $500,000. In 1987, the city restored its courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2015. According to these numbers, what approximately did the hospital cost?

Accepted Answer

A)  $3.6 million in 2015 dollars, which is less than the cost of the courthouse restoration in 2015 dollars 
B)  $3.6 million in 2015 dollars, which is more than the cost of the courthouse restoration in 2015 dollars 
C)  $4.1 million in 2015dollars, which is less than the cost of the courthouse restoration in 2015 dollars 
D)  $4.1 million in 2015 dollars, which is more than the cost of the courthouse restoration in 2015 dollars 
A)  $3.6 million in 2015 dollars, which is less than the cost of the courthouse restoration in 2015 dollars 
B)  $3.6 million in 2015 dollars, which is more than the cost of the courthouse restoration in 2015 dollars 
C)  $4.1 million in 2015dollars, which is less than the cost of the courthouse restoration in 2015 dollars 
D)  $4.1 million in 2015 dollars, which is more than the cost of the courthouse restoration in 2015 dollars

Question 4

In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 50 units of food and 10 units of clothing.
 Food Clothing
Last year's price $4$ $10
This year's price $6  $20
a.What are the percentage increases in the price of food and in the price of clothing?
b. What is the percentage increase in the CPI?
c. Do these price changes affect all consumers to the same extent? Explain.

Accepted Answer

a.The price of food increased by 50 perc

Question 5

What is by far the largest category of goods and services in the CPI basket?

Accepted Answer

A)  shelter 
B)  recreation, education, and reading 
C)  transportation 
D)  food 
A)  shelter 
B)  recreation, education, and reading 
C)  transportation 
D)  food

Question 6

What is the purpose of measuring the overall level of prices in the economy?

Accepted Answer

A)  to allow the measurement of GDP 
B)  to allow consumers to know what kinds of prices to expect in the future 
C)  to allow comparison between dollar figures from different points in time 
D)  to allow government officials to determine whether the value of the dollar has increased or decreased 
A)  to allow the measurement of GDP 
B)  to allow consumers to know what kinds of prices to expect in the future 
C)  to allow comparison between dollar figures from different points in time 
D)  to allow government officials to determine whether the value of the dollar has increased or decreased

Question 7

Loretta is offered a job in St. John's that pays $50,000. She is also offered a job in Halifax that pays $62 250. Which set of CPIs comes closest to giving both salaries the same purchasing power?

Accepted Answer

A)  83.3 in St. John's and 100 in Halifax 
B)  89.3 in St. John's and 100 in Halifax 
C)  100 in St. John's and 124.5 in Halifax 
D)  100 in St. John's and 140 in Halifax 
A)  83.3 in St. John's and 100 in Halifax 
B)  89.3 in St. John's and 100 in Halifax 
C)  100 in St. John's and 124.5 in Halifax 
D)  100 in St. John's and 140 in Halifax

Question 8

The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the deflation rate between the first and second year, and between the second and third year?

Accepted Answer

A)  11 percent between the first and second year, 11 percent between the second and third year 
B)  11 percent between the first and second year, 12 percent between the second and third year 
C)  10 percent between the first and second year, 11 percent between the second and third year 
D)  10 percent between the first and second year, 12 percent between the second and third year 
A)  11 percent between the first and second year, 11 percent between the second and third year 
B)  11 percent between the first and second year, 12 percent between the second and third year 
C)  10 percent between the first and second year, 11 percent between the second and third year 
D)  10 percent between the first and second year, 12 percent between the second and third year

Question 9

Samantha deposits $2000 into a saving account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 2 percent. What happens at the end of the year?

Accepted Answer

A)  Samantha has $100 more in her account, and her purchasing power has increased by about $40. 
B)  Samantha has $100 more in her account, and her purchasing power has increased by about $60. 
C)  Samantha has $140 more in her account, and her purchasing power has increased about $100. 
D)  Samantha has $140 more in her account, and her purchasing power has increased about $40. 
A)  Samantha has $100 more in her account, and her purchasing power has increased by about $40. 
B)  Samantha has $100 more in her account, and her purchasing power has increased by about $60. 
C)  Samantha has $140 more in her account, and her purchasing power has increased about $100. 
D)  Samantha has $140 more in her account, and her purchasing power has increased about $40.

Question 10

In the CPI, how are goods and services weighted?

Accepted Answer

A)  according to how much consumers buy of each item 
B)  according to whether the goods and services are necessities or luxuries 
C)  according to the levels of production of the goods and services in the domestic economy 
D)  according to the expenditures on them in the GDP national income accounts 
A)  according to how much consumers buy of each item 
B)  according to whether the goods and services are necessities or luxuries 
C)  according to the levels of production of the goods and services in the domestic economy 
D)  according to the expenditures on them in the GDP national income accounts

Question 11

Which statement best describes nominal interest rates and real interest rates in the 1970s and 1990s?

Accepted Answer

A)  Nominal interest rates were high in the 1970s, and real interest rates were high in the 1990s. 
B)  Nominal interest rates were high in the 1970s, and real interest rates were low in the 1990s. 
C)  Nominal interest rates were high in the 1990s, and real interest rates were high in the 1970s. 
D)  Nominal interest rates were high in the 1990s, and real interest rates were low in the 1970s. 
A)  Nominal interest rates were high in the 1970s, and real interest rates were high in the 1990s. 
B)  Nominal interest rates were high in the 1970s, and real interest rates were low in the 1990s. 
C)  Nominal interest rates were high in the 1990s, and real interest rates were high in the 1970s. 
D)  Nominal interest rates were high in the 1990s, and real interest rates were low in the 1970s.

Question 12

In the 1970s, nominal interest rates were high and real interest rates were low. In the 1990s, nominal interest rates were low and real interest rates were high.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price. By itself, what will this do to the GDP deflator and the consumer price index?

Accepted Answer

A)  The GDP deflator and the consumer price index will fall. 
B)  The GDP deflator and the consumer price index will be unaffected. 
C)  The GDP deflator will be unaffected, but the consumer price index will fall. 
D)  The GDP deflator will fall, but the consumer price index will be unaffected. 
A)  The GDP deflator and the consumer price index will fall. 
B)  The GDP deflator and the consumer price index will be unaffected. 
C)  The GDP deflator will be unaffected, but the consumer price index will fall. 
D)  The GDP deflator will fall, but the consumer price index will be unaffected.

Question 14

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 3 percent.

Accepted Answer

A) True 
 B)False

Question 15

The price of imported silk dresses produced by a Canadian company operating in Thailand increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

Accepted Answer

A)  The GDP deflator and the CPI will both increase. 
B)  The GDP deflator will increase, but the CPI will be unaffected. 
C)  The GDP deflator and the CPI will both be unaffected. 
D)  The GDP deflator will be unaffected, but the CPI will increase. 
A)  The GDP deflator and the CPI will both increase. 
B)  The GDP deflator will increase, but the CPI will be unaffected. 
C)  The GDP deflator and the CPI will both be unaffected. 
D)  The GDP deflator will be unaffected, but the CPI will increase.

Question 16

In 1972 in Sarnia, Ontario, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

Accepted Answer

A)  60 in 1972 and 150 today 
B)  65 in 1972 and 156 today 
C)  90 in 1972 and 145.8 today 
D)  100 in 1972 and 141.67 today 
A)  60 in 1972 and 150 today 
B)  65 in 1972 and 156 today 
C)  90 in 1972 and 145.8 today 
D)  100 in 1972 and 141.67 today

Question 17

In 1972 in Kelowna, BC, one could buy model rocket engines for $1.50. If those same engines cost $3.00 today, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

Accepted Answer

A)  60 in 1972 and 100 today 
B)  60 in 1972 and 110 today 
C)  60 in 1972 and 120 today 
D)  60 in 1972 and 130 today 
A)  60 in 1972 and 100 today 
B)  60 in 1972 and 110 today 
C)  60 in 1972 and 120 today 
D)  60 in 1972 and 130 today

Question 18

In 1969, Don bought a Dodge Dart for $2500. In 2015, he bought a Honda Civic for $22,000. If the price index in 1969 was 39.2 and the price index in 2015 was 190, what is the price of the Dodge Dart in 2015 prices?

Accepted Answer

A)  $3583 
B)  $4500 
C)  $9762 
D)  $12,117 
A)  $3583 
B)  $4500 
C)  $9762 
D)  $12,117

Question 19

Noah puts money in the bank and earns a 7 percent nominal interest rate. What happens if the inflation rate is 3 percent?

Accepted Answer

A)  Ralph will have 3 percent more money, which will purchase 5 percent more goods. 
B)  Ralph will have 3 percent more money, which will purchase 10 percent more goods. 
C)  Ralph will have 7 percent more money, which will purchase 4 percent more goods. 
D)  Ralph will have 7 percent more money, which will purchase 10 percent more goods. 
A)  Ralph will have 3 percent more money, which will purchase 5 percent more goods. 
B)  Ralph will have 3 percent more money, which will purchase 10 percent more goods. 
C)  Ralph will have 7 percent more money, which will purchase 4 percent more goods. 
D)  Ralph will have 7 percent more money, which will purchase 10 percent more goods.

Question 20

What best defines the inflation rate?

Accepted Answer

A)  the price level 
B)  the change in the price level 
C)  the price level divided by the price level in the previous period 
D)  the percentage change in the price level from the previous period 
A)  the price level 
B)  the change in the price level 
C)  the price level divided by the price level in the previous period 
D)  the percentage change in the price level from the previous period

Which problem in the construction of the CPI is the creation of the mobile phone most relevant to?

The Canadian income tax system is indexed to the CPI.

What is by far the largest category of goods and services in the CPI basket?

What is the purpose of measuring the overall level of prices in the economy?

Loretta is offered a job in St. John's that pays $50,000. She is also offered a job in Halifax that pays $62 250. Which set of CPIs comes closest to giving both salaries the same purchasing power?

The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the deflation rate between the first and second year, and between the second and third year?

Samantha deposits $2000 into a saving account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 2 percent. What happens at the end of the year?

In the CPI, how are goods and services weighted?

Which statement best describes nominal interest rates and real interest rates in the 1970s and 1990s?

In the 1970s, nominal interest rates were high and real interest rates were low. In the 1990s, nominal interest rates were low and real interest rates were high.

Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price. By itself, what will this do to the GDP deflator and the consumer price index?

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 3 percent.

The price of imported silk dresses produced by a Canadian company operating in Thailand increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

In 1972 in Sarnia, Ontario, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

In 1972 in Kelowna, BC, one could buy model rocket engines for $1.50. If those same engines cost $3.00 today, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

In 1969, Don bought a Dodge Dart for $2500. In 2015, he bought a Honda Civic for $22,000. If the price index in 1969 was 39.2 and the price index in 2015 was 190, what is the price of the Dodge Dart in 2015 prices?

Noah puts money in the bank and earns a 7 percent nominal interest rate. What happens if the inflation rate is 3 percent?

What best defines the inflation rate?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 6: Measuring the Cost of Living

Which problem in the construction of the CPI is the creation of the mobile phone most relevant to?

The Canadian income tax system is indexed to the CPI.

What is by far the largest category of goods and services in the CPI basket?

What is the purpose of measuring the overall level of prices in the economy?

Loretta is offered a job in St. John's that pays $50,000. She is also offered a job in Halifax that pays $62 250. Which set of CPIs comes closest to giving both salaries the same purchasing power?

The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the deflation rate between the first and second year, and between the second and third year?

Samantha deposits $2000 into a saving account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 2 percent. What happens at the end of the year?

In the CPI, how are goods and services weighted?

Which statement best describes nominal interest rates and real interest rates in the 1970s and 1990s?

In the 1970s, nominal interest rates were high and real interest rates were low. In the 1990s, nominal interest rates were low and real interest rates were high.

Suppose that Canadian mining companies purchase German-made ore trucks at a reduced price. By itself, what will this do to the GDP deflator and the consumer price index?

If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 3 percent.

The price of imported silk dresses produced by a Canadian company operating in Thailand increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

In 1972 in Sarnia, Ontario, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

In 1972 in Kelowna, BC, one could buy model rocket engines for $1.50. If those same engines cost $3.00 today, which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

In 1969, Don bought a Dodge Dart for $2500. In 2015, he bought a Honda Civic for $22,000. If the price index in 1969 was 39.2 and the price index in 2015 was 190, what is the price of the Dodge Dart in 2015 prices?

Noah puts money in the bank and earns a 7 percent nominal interest rate. What happens if the inflation rate is 3 percent?

What best defines the inflation rate?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters