Question 1

The price index is 190 in one year and 210 in the next. What is the inflation rate?

Accepted Answer

A)  9.5 percent 
B)  10.5 percent 
C)  16.7 percent 
D)  19.0 percent 
A)  9.5 percent 
B)  10.5 percent 
C)  16.7 percent 
D)  19.0 percent

Question 2

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $35,000 to have kept pace with consumer price inflation.

Accepted Answer

A) True 
 B)False

Question 3

Table 6-3
In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, $ 4 \mathrm{~kg} $ of chicken, 3 shirts, and 2 litres of gasoline. The per-unit prices of these goods have been as follows:
 
-Refer to the Table 6-3. What was the inflation rate, as measured by the CPI, between 2012 and 2013?

Accepted Answer

A)  -4.44 percent 
B)  -7.14 percent 
C)  3.75 percent 
D)  11.25 percent 
A)  -4.44 percent 
B)  -7.14 percent 
C)  3.75 percent 
D)  11.25 percent

Question 4

Food, health and personal care, and clothing and footwear account for over 50 percent of the goods and services in the CPI basket of goods.

Accepted Answer

A) True 
 B)False

Question 5

Table 6-5
This table pertains to an economy with only two goods: books and calculators. The fixed basket consists of 5 books and 10 calculators.
 
-Refer to the Table 6-5. Using 2013 as the base year, what is the consumer price index?

Accepted Answer

A)  100 in 2013, 135 in 2014, and 155 in 2015 
B)  100 in 2013, 270 in 2014, and 310 in 2015 
C)  200 in 2013, 270 in 2014, and 310 in 2015 
D)  200 in 2013, 540 in 2014, and 620 in 2015 
A)  100 in 2013, 135 in 2014, and 155 in 2015 
B)  100 in 2013, 270 in 2014, and 310 in 2015 
C)  200 in 2013, 270 in 2014, and 310 in 2015 
D)  200 in 2013, 540 in 2014, and 620 in 2015

Question 6

Suppose that the nominal interest rate is 5 percent and the expected inflation rate is 3 percent. What happens with the value of savings?

Accepted Answer

A)  The dollar value of savings increases by 8 percent, and the value of savings measured in goods is expected to increase by 3 percent. 
B)  The dollar value of savings increases by 8 percent, and the value of savings measured in goods is expected to increase by 5 percent. 
C)  The dollar value of savings increases by 5 percent, and the value of savings measured in goods is expected to increase by 2 percent. 
D)  The dollar value of savings increases by 5 percent, and the value of savings measured in goods is expected to increase by 3 percent. 
A)  The dollar value of savings increases by 8 percent, and the value of savings measured in goods is expected to increase by 3 percent. 
B)  The dollar value of savings increases by 8 percent, and the value of savings measured in goods is expected to increase by 5 percent. 
C)  The dollar value of savings increases by 5 percent, and the value of savings measured in goods is expected to increase by 2 percent. 
D)  The dollar value of savings increases by 5 percent, and the value of savings measured in goods is expected to increase by 3 percent.

Question 7

Suppose the price of a carton of ice cream rises from $4 to $5 and the price of coffee rises from $2 to $2.50. If the CPI rises from 150 to 200, what will people likely buy?

Accepted Answer

A)  more ice cream and more coffee 
B)  more ice cream and less coffee 
C)  less ice cream and more coffee 
D)  less ice cream and less coffee 
A)  more ice cream and more coffee 
B)  more ice cream and less coffee 
C)  less ice cream and more coffee 
D)  less ice cream and less coffee

Question 8

Suppose that the nominal interest rate was 3 percent and the inflation rate was 1 percent. What happened with the value of savings?

Accepted Answer

A)  The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent. 
B)  The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent. 
C)  The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 2 percent. 
D)  The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent. 
A)  The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent. 
B)  The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent. 
C)  The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 2 percent. 
D)  The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent.

Question 9

Welfare payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that welfare recipients are harmed by inflation as it is measured by the CPI. Is the newspaper editorial correct?

Accepted Answer

A)  The newspaper editorial is correct if the price of the basket consumed by welfare recipients increases faster than the price of the CPI basket. 
B)  The newspaper editorial is correct if the price of the basket consumed by welfare recipients increases slower than the price of the CPI basket. 
C)  The newspaper editorial is correct if the prices of the goods consumed by welfare recipients are cheaper than the goods in the CPI basket. 
D)  The newspaper editorial is correct if the prices of the goods consumed by welfare recipients are more expensive than the goods in the CPI basket. 
A)  The newspaper editorial is correct if the price of the basket consumed by welfare recipients increases faster than the price of the CPI basket. 
B)  The newspaper editorial is correct if the price of the basket consumed by welfare recipients increases slower than the price of the CPI basket. 
C)  The newspaper editorial is correct if the prices of the goods consumed by welfare recipients are cheaper than the goods in the CPI basket. 
D)  The newspaper editorial is correct if the prices of the goods consumed by welfare recipients are more expensive than the goods in the CPI basket.

Question 10

Which of the following best describes real interest rates in the 1970s and 1990s?

Accepted Answer

A)  high in the 1970s and 1990s 
B)  low in the 1970s and 1990s 
C)  high in the 1970s; low in the 1990s 
D)  low in the 1970s; high in the 1990s 
A)  high in the 1970s and 1990s 
B)  low in the 1970s and 1990s 
C)  high in the 1970s; low in the 1990s 
D)  low in the 1970s; high in the 1990s

Question 11

-Refer to the Table 6-1. What was the inflation rate in 2015?

Accepted Answer

A)  4 percent 
B)  5 percent 
C)  20 percent 
D)  25 percent 
A)  4 percent 
B)  5 percent 
C)  20 percent 
D)  25 percent

Question 12

Which change in the price index shows the greatest rate of inflation?

Accepted Answer

A)  100 to 110 
B)  150 to 170 
C)  180 to 200 
D)  220 to 245 
A)  100 to 110 
B)  150 to 170 
C)  180 to 200 
D)  220 to 245

Question 13

Which situation is described by the term "inflation"?

Accepted Answer

A)  The overall level of prices in the economy is increasing. 
B)  Incomes in the economy are increasing. 
C)  Stock market prices are rising. 
D)  Nominal interest rates in the economy are rising. 
A)  The overall level of prices in the economy is increasing. 
B)  Incomes in the economy are increasing. 
C)  Stock market prices are rising. 
D)  Nominal interest rates in the economy are rising.

The price index is 190 in one year and 210 in the next. What is the inflation rate?

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $35,000 to have kept pace with consumer price inflation.

Food, health and personal care, and clothing and footwear account for over 50 percent of the goods and services in the CPI basket of goods.

Table 6-5 This table pertains to an economy with only two goods: books and calculators. The fixed basket consists of 5 books and 10 calculators. -Refer to the Table 6-5. Using 2013 as the base year, what is the consumer price index?

Suppose that the nominal interest rate is 5 percent and the expected inflation rate is 3 percent. What happens with the value of savings?

Suppose the price of a carton of ice cream rises from $4 to $5 and the price of coffee rises from $2 to $2.50. If the CPI rises from 150 to 200, what will people likely buy?

Suppose that the nominal interest rate was 3 percent and the inflation rate was 1 percent. What happened with the value of savings?

Welfare payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that welfare recipients are harmed by inflation as it is measured by the CPI. Is the newspaper editorial correct?

Which of the following best describes real interest rates in the 1970s and 1990s?

-Refer to the Table 6-1. What was the inflation rate in 2015?

Which change in the price index shows the greatest rate of inflation?

Which situation is described by the term "inflation"?

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

The price index is 190 in one year and 210 in the next. What is the inflation rate?

If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you need to be making $35,000 to have kept pace with consumer price inflation.

Food, health and personal care, and clothing and footwear account for over 50 percent of the goods and services in the CPI basket of goods.

Table 6-5 This table pertains to an economy with only two goods: books and calculators. The fixed basket consists of 5 books and 10 calculators. -Refer to the Table 6-5. Using 2013 as the base year, what is the consumer price index?

Suppose that the nominal interest rate is 5 percent and the expected inflation rate is 3 percent. What happens with the value of savings?

Suppose the price of a carton of ice cream rises from $4 to $5 and the price of coffee rises from $2 to $2.50. If the CPI rises from 150 to 200, what will people likely buy?

Suppose that the nominal interest rate was 3 percent and the inflation rate was 1 percent. What happened with the value of savings?

Welfare payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that welfare recipients are harmed by inflation as it is measured by the CPI. Is the newspaper editorial correct?

Which of the following best describes real interest rates in the 1970s and 1990s?

-Refer to the Table 6-1. What was the inflation rate in 2015?

Which change in the price index shows the greatest rate of inflation?

Which situation is described by the term "inflation"?

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