Question 1

The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's,which will always have the value of:

Accepted Answer

A)  1. 
B)  50. 
C)  100. 
D)  150 
E)  229. 
A)  1. 
B)  50. 
C)  100. 
D)  150 
E)  229.

Question 2

The distinction between price confusion problems and menu costs is that:

Accepted Answer

A)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs have to do with people confusing changes in nominal and real wages. 
B)  menu costs result from confusion between relative demand and inflationary pressures, whereas price confusion has to do with people confusing changes in nominal and real wages. 
C)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs relate to producers changing prices, typically during inflationary periods. 
D)  menu costs occur during deflation, whereas price confusion problems occur during inflation. 
E)  menu costs only affect the food industry, whereas price confusion problems occur in high-tech industries. 
A)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs have to do with people confusing changes in nominal and real wages. 
B)  menu costs result from confusion between relative demand and inflationary pressures, whereas price confusion has to do with people confusing changes in nominal and real wages. 
C)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs relate to producers changing prices, typically during inflationary periods. 
D)  menu costs occur during deflation, whereas price confusion problems occur during inflation. 
E)  menu costs only affect the food industry, whereas price confusion problems occur in high-tech industries.

Question 3

The chained consumer price index (CPI) tends to be:

Accepted Answer

A)  a better measure of prices than the traditional CPI, no matter what the circumstances. 
B)  a better measure of prices than the traditional CPI, but only if inflation is relatively high. 
C)  a better measure of prices than the traditional CPI, but only if inflation is relatively low. 
D)  equally as good as the traditional CPI, under all conditions. 
E)  a poor measure of prices, but better than the gross domestic product (GDP) deflator. 
A)  a better measure of prices than the traditional CPI, no matter what the circumstances. 
B)  a better measure of prices than the traditional CPI, but only if inflation is relatively high. 
C)  a better measure of prices than the traditional CPI, but only if inflation is relatively low. 
D)  equally as good as the traditional CPI, under all conditions. 
E)  a poor measure of prices, but better than the gross domestic product (GDP) deflator.

Question 4

Which statement best represents the purpose for measuring annual inflation (or deflation)?

Accepted Answer

A)  The main purpose is to find out how much the price of gasoline has increased from year to year. 
B)  The main purpose is to find out whether more goods have increased (or decreased) in price compared to the number of goods whose price has decreased (or increased). 
C)  The main purpose is to find out whether the overall cost of living has changed. 
D)  The main purpose is to find out whether the economy has produced more goods this year than last year. 
E)  The main purpose is to find out whether the cost of entertainment is more expensive (or cheaper) this year than last year. 
A)  The main purpose is to find out how much the price of gasoline has increased from year to year. 
B)  The main purpose is to find out whether more goods have increased (or decreased) in price compared to the number of goods whose price has decreased (or increased). 
C)  The main purpose is to find out whether the overall cost of living has changed. 
D)  The main purpose is to find out whether the economy has produced more goods this year than last year. 
E)  The main purpose is to find out whether the cost of entertainment is more expensive (or cheaper) this year than last year.

Question 5

If the consumer price index (CPI) was 100 in the period of 1982-1984,then:

Accepted Answer

A)  there would be deflation. 
B)  this period was the base period. 
C)  this period was characterized by menu costs. 
D)  this period was economically optimal. 
E)  this period was inflationary. 
A)  there would be deflation. 
B)  this period was the base period. 
C)  this period was characterized by menu costs. 
D)  this period was economically optimal. 
E)  this period was inflationary.

Question 6

A price confusion problem is best described as:

Accepted Answer

A)  the difficulty producers have in determining whether higher prices are due to increased demand or inflation. 
B)  the difficulty consumers have in determining whether real prices have risen in order to decide whether they should buy more or less. 
C)  the difficulty that producers have in determining whether a wage increase will lead to an increase in real costs. 
D)  the problem consumers have in determining whether relative prices have changed when all prices are increasing, albeit at different rates. 
E)  the problem both consumers and producers face in interpreting consumer price index (CPI) data from the Bureau of Labor Statistics (BLS). 
A)  the difficulty producers have in determining whether higher prices are due to increased demand or inflation. 
B)  the difficulty consumers have in determining whether real prices have risen in order to decide whether they should buy more or less. 
C)  the difficulty that producers have in determining whether a wage increase will lead to an increase in real costs. 
D)  the problem consumers have in determining whether relative prices have changed when all prices are increasing, albeit at different rates. 
E)  the problem both consumers and producers face in interpreting consumer price index (CPI) data from the Bureau of Labor Statistics (BLS).

Question 7

Medical care typically composes ____ of the typical consumer price index (CPI).

Accepted Answer

A)  5% 
B)  7% 
C)  10% 
D)  12% 
E)  15% 
A)  5% 
B)  7% 
C)  10% 
D)  12% 
E)  15%

Question 8

Inflation is occurring in a nation; the implication(s) of this is/are:

Accepted Answer

A)  both real and nominal wages are rising. 
B)  both real and nominal wages are falling. 
C)  almost none, because most wages increase at about the same rate as inflation. 
D)  holding nominal wages constant, the real wage would rise. 
E)  holding nominal wages constant, the real wage would fall. 
A)  both real and nominal wages are rising. 
B)  both real and nominal wages are falling. 
C)  almost none, because most wages increase at about the same rate as inflation. 
D)  holding nominal wages constant, the real wage would rise. 
E)  holding nominal wages constant, the real wage would fall.

Question 9

If the price of industrial plastic injection molding machines rose by 20% and the price of oranges fell by 20%,then:

Accepted Answer

A)  the Consumer Price Index (CPI) would remain unchanged. 
B)  the CPI would rise if oranges had a greater weight. 
C)  the CPI would rise because plastic injection molding machines weigh more physically per unit. 
D)  the CPI would fall because people buy more oranges than plastic injection molding machines. 
E)  the CPI would fall by the weighted value of oranges in the CPI, but because industrial plastic injection molding machines are not a consumer good, they would not affect the CPI. 
A)  the Consumer Price Index (CPI) would remain unchanged. 
B)  the CPI would rise if oranges had a greater weight. 
C)  the CPI would rise because plastic injection molding machines weigh more physically per unit. 
D)  the CPI would fall because people buy more oranges than plastic injection molding machines. 
E)  the CPI would fall by the weighted value of oranges in the CPI, but because industrial plastic injection molding machines are not a consumer good, they would not affect the CPI.

Question 10

Refer to the following figure when answering the next five questions:
  
-According to the figure,deflation was occurring:

Accepted Answer

A)  between 2003 and 2004. 
B)  from 1996 until 1999. 
C)  from 1996 through 1996 and between 2003 and 2004. 
D)  in none of the years shown. 
E)  in all of the years shown. 
A)  between 2003 and 2004. 
B)  from 1996 until 1999. 
C)  from 1996 through 1996 and between 2003 and 2004. 
D)  in none of the years shown. 
E)  in all of the years shown.

Question 11

If the goods producers buy change dramatically between years,then:

Accepted Answer

A)  this would be reflected in both the consumer price index (CPI) and the gross domestic product (GDP) deflator. 
B)  this would not be reflected in either the CPI or the GDP deflator. 
C)  it would mean the market basket would be automatically updated to reflect the changes. 
D)  this would be reflected in the GDP deflator but not the CPI. 
E)  menu costs would fall. 
A)  this would be reflected in both the consumer price index (CPI) and the gross domestic product (GDP) deflator. 
B)  this would not be reflected in either the CPI or the GDP deflator. 
C)  it would mean the market basket would be automatically updated to reflect the changes. 
D)  this would be reflected in the GDP deflator but not the CPI. 
E)  menu costs would fall.

Question 12

The ratio of Price in an Earlier Time / Price in Today's Time:

Accepted Answer

A)  would be used to convert the consumer price index (CPI) to the gross domestic product (GDP) deflator. 
B)  would be used to convert today's price to an earlier price adjusting for inflation. 
C)  would be used to find the percentage of substitution bias. 
D)  would be used to find the percentage of the quality change bias. 
E)  would be used to convert an earlier price to today's price adjusting for inflation. 
A)  would be used to convert the consumer price index (CPI) to the gross domestic product (GDP) deflator. 
B)  would be used to convert today's price to an earlier price adjusting for inflation. 
C)  would be used to find the percentage of substitution bias. 
D)  would be used to find the percentage of the quality change bias. 
E)  would be used to convert an earlier price to today's price adjusting for inflation.

Question 13

The chained consumer price index (CPI) is a/an:

Accepted Answer

A)  arithmetic average of the prices of all goods produced in gross domestic product (GDP). 
B)  arithmetic average of the prices of all consumer goods produced in GDP. 
C)  geometric average of the prices of the typical consumer market basket. 
D)  geometric average of the prices of all goods produced in GDP. 
E)  process of linking the prices of older goods that are no longer produced (such as cassette tapes and eight-track tapes) with "modern" goods (such as MP3 and MP4 players) in a process called chaining. 
A)  arithmetic average of the prices of all goods produced in gross domestic product (GDP). 
B)  arithmetic average of the prices of all consumer goods produced in GDP. 
C)  geometric average of the prices of the typical consumer market basket. 
D)  geometric average of the prices of all goods produced in GDP. 
E)  process of linking the prices of older goods that are no longer produced (such as cassette tapes and eight-track tapes) with "modern" goods (such as MP3 and MP4 players) in a process called chaining.

Question 14

Your nominal wage increases by 10%,and the overall price level increases by 12%.Which statement is correct?

Accepted Answer

A)  If you feel richer, you are experiencing money illusion. 
B)  You face a price confusion problem. 
C)  You face a menu costs problem. 
D)  You would be certain that your real wage had increased. 
E)  Bureau of Labor Statistics factors would cause you to experience deflation. 
A)  If you feel richer, you are experiencing money illusion. 
B)  You face a price confusion problem. 
C)  You face a menu costs problem. 
D)  You would be certain that your real wage had increased. 
E)  Bureau of Labor Statistics factors would cause you to experience deflation.

Question 15

It is rare when prices fall in modern times.However,it is likely that they would fall during severe recessions.What year is the most likely for this to have occurred?

Accepted Answer

A)  2005 
B)  2009 
C)  2011 
D)  2012 
E)  2003 
A)  2005 
B)  2009 
C)  2011 
D)  2012 
E)  2003

Question 16

If the value of the consumer price index (CPI) in 2013 was 135 and the value of the CPI in 2012 was 117,we could correctly say that:

Accepted Answer

A)  the typical basket of goods was about 18% more expensive in 2013 than in 2012. 
B)  the typical basket of goods was about 18% less expensive in 2013 than in 2012. 
C)  the typical basket of goods was about 15.4% more expensive in 2013 than in 2012. 
D)  the average price of all items included in gross domestic product (GDP) was about 18% more expensive in 2013 than in 2012. 
E)  the average price of all items included in GDP was about 15.4% more expensive in 2013 than in 2012. 
A)  the typical basket of goods was about 18% more expensive in 2013 than in 2012. 
B)  the typical basket of goods was about 18% less expensive in 2013 than in 2012. 
C)  the typical basket of goods was about 15.4% more expensive in 2013 than in 2012. 
D)  the average price of all items included in gross domestic product (GDP) was about 18% more expensive in 2013 than in 2012. 
E)  the average price of all items included in GDP was about 15.4% more expensive in 2013 than in 2012.

Question 17

Tofu becomes more expensive in 2008 at Safeway/Vons in Laguna Nigel,California.This means:

Accepted Answer

A)  the consumer price index (CPI) will rise in 2008 if, and only if, Laguna Nigel is one of the considered 38 geographic locations and tofu is one of the 8,000 goods included in the CPI. 
B)  the CPI will almost certainly rise in 2008, even if Laguna Nigel is not included in the index, as long as tofu is included and becomes more expensive on average at the other locations. 
C)  the CPI will likely fall (in 2008) if the average weighted price of tofu increases in the United States and the price of tofu at Safeway/Vons makes almost no difference in the CPI. 
D)  the CPI might rise or fall (in 2008) and the price of tofu at Safeway/Vons could make a very small difference in the CPI if tofu at Safeway/Vons is included in the index.But because tofu is a relatively large portion of the entire CPI, it is most likely the CPI will rise. 
E)  tofu, even if included in the CPI in 2008, would make a small difference on the average weighted price of food and beverages.Food and beverages only constitute a small portion of the CPI, and hence, this would be unlikely to affect the overall CPI by any significant amount. 
A)  the consumer price index (CPI) will rise in 2008 if, and only if, Laguna Nigel is one of the considered 38 geographic locations and tofu is one of the 8,000 goods included in the CPI. 
B)  the CPI will almost certainly rise in 2008, even if Laguna Nigel is not included in the index, as long as tofu is included and becomes more expensive on average at the other locations. 
C)  the CPI will likely fall (in 2008) if the average weighted price of tofu increases in the United States and the price of tofu at Safeway/Vons makes almost no difference in the CPI. 
D)  the CPI might rise or fall (in 2008) and the price of tofu at Safeway/Vons could make a very small difference in the CPI if tofu at Safeway/Vons is included in the index.But because tofu is a relatively large portion of the entire CPI, it is most likely the CPI will rise. 
E)  tofu, even if included in the CPI in 2008, would make a small difference on the average weighted price of food and beverages.Food and beverages only constitute a small portion of the CPI, and hence, this would be unlikely to affect the overall CPI by any significant amount.

Question 18

Arguably,the increases in housing prices in 2005-2006:

Accepted Answer

A)  caused a menu cost problem for producers. 
B)  caused a price confusion problem for producers. 
C)  caused a money illusion problem for producers. 
D)  caused future price uncertainty for producers. 
E)  caused a money illusion problem for consumers. 
A)  caused a menu cost problem for producers. 
B)  caused a price confusion problem for producers. 
C)  caused a money illusion problem for producers. 
D)  caused future price uncertainty for producers. 
E)  caused a money illusion problem for consumers.

Question 19

To convert a current price of a product to its price in the past,we would take the current price of a product and:

Accepted Answer

A)  divide by the current price index and then add the previous price index. 
B)  multiply by the ratio of the current price index to the previous price index. 
C)  multiply by the ratio of the previous price index to the current price index. 
D)  divide by the ratio of the previous price index to the current price index. 
E)  average the chain-weighted consumer price index (CPI) and the traditional CPI of the previous year, and then multiply the current price by the average of the two. 
A)  divide by the current price index and then add the previous price index. 
B)  multiply by the ratio of the current price index to the previous price index. 
C)  multiply by the ratio of the previous price index to the current price index. 
D)  divide by the ratio of the previous price index to the current price index. 
E)  average the chain-weighted consumer price index (CPI) and the traditional CPI of the previous year, and then multiply the current price by the average of the two.

Question 20

Refer to the following figure to answer the next four questions:
  
-Based on the figure,one could correctly state that:

Accepted Answer

A)  although U.S.inflation was generally higher in the 1970s and 1980s, that situation was reversed in the later years for the European Union. 
B)  inflation in both the United States and the European Union was higher in the 1990s than it was in the 1970s and 1980s. 
C)  deflation was a problem in the United States and the European Union in the 1990s, but inflation was a problem for both in the 1970s and 1980s. 
D)  U.S.and E.U.inflation both tended to be higher in the 1970s and 1980s than in the 1990s. 
E)  typically, while the European Union had inflation problems, the United States had deflation problems. 
A)  although U.S.inflation was generally higher in the 1970s and 1980s, that situation was reversed in the later years for the European Union. 
B)  inflation in both the United States and the European Union was higher in the 1990s than it was in the 1970s and 1980s. 
C)  deflation was a problem in the United States and the European Union in the 1990s, but inflation was a problem for both in the 1970s and 1980s. 
D)  U.S.and E.U.inflation both tended to be higher in the 1970s and 1980s than in the 1990s. 
E)  typically, while the European Union had inflation problems, the United States had deflation problems.

The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's,which will always have the value of:

The distinction between price confusion problems and menu costs is that:

The chained consumer price index (CPI) tends to be:

Which statement best represents the purpose for measuring annual inflation (or deflation)?

If the consumer price index (CPI) was 100 in the period of 1982-1984,then:

A price confusion problem is best described as:

Medical care typically composes ____ of the typical consumer price index (CPI).

Inflation is occurring in a nation; the implication(s) of this is/are:

If the price of industrial plastic injection molding machines rose by 20% and the price of oranges fell by 20%,then:

Refer to the following figure when answering the next five questions: -According to the figure,deflation was occurring:

If the goods producers buy change dramatically between years,then:

The ratio of Price in an Earlier Time / Price in Today's Time:

The chained consumer price index (CPI) is a/an:

Your nominal wage increases by 10%,and the overall price level increases by 12%.Which statement is correct?

It is rare when prices fall in modern times.However,it is likely that they would fall during severe recessions.What year is the most likely for this to have occurred?

If the value of the consumer price index (CPI) in 2013 was 135 and the value of the CPI in 2012 was 117,we could correctly say that:

Tofu becomes more expensive in 2008 at Safeway/Vons in Laguna Nigel,California.This means:

Arguably,the increases in housing prices in 2005-2006:

To convert a current price of a product to its price in the past,we would take the current price of a product and:

Refer to the following figure to answer the next four questions: -Based on the figure,one could correctly state that:

The Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Price Controls

The Efficiency of Markets and the Costs of Taxation

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

Savings, interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

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Exam 8: The Price Level and Inflation

The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's,which will always have the value of:

The distinction between price confusion problems and menu costs is that:

The chained consumer price index (CPI) tends to be:

Which statement best represents the purpose for measuring annual inflation (or deflation)?

If the consumer price index (CPI) was 100 in the period of 1982-1984,then:

A price confusion problem is best described as:

Medical care typically composes ____ of the typical consumer price index (CPI).

Inflation is occurring in a nation; the implication(s) of this is/are:

If the price of industrial plastic injection molding machines rose by 20% and the price of oranges fell by 20%,then:

Refer to the following figure when answering the next five questions: -According to the figure,deflation was occurring:

If the goods producers buy change dramatically between years,then:

The ratio of Price in an Earlier Time / Price in Today's Time:

The chained consumer price index (CPI) is a/an:

Your nominal wage increases by 10%,and the overall price level increases by 12%.Which statement is correct?

It is rare when prices fall in modern times.However,it is likely that they would fall during severe recessions.What year is the most likely for this to have occurred?

If the value of the consumer price index (CPI) in 2013 was 135 and the value of the CPI in 2012 was 117,we could correctly say that:

Tofu becomes more expensive in 2008 at Safeway/Vons in Laguna Nigel,California.This means:

Arguably,the increases in housing prices in 2005-2006:

To convert a current price of a product to its price in the past,we would take the current price of a product and:

Refer to the following figure to answer the next four questions: -Based on the figure,one could correctly state that:

The Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Price Controls

The Efficiency of Markets and the Costs of Taxation

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

Savings, interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters