Exam 18: Measuring the Price Level and Inflation

One family earned an income of $28,000 in 1995. Over the next five years, their income increased by 15 percent, while the CPI increased by 12 percent. After five years, this family's nominal income ________, and their real income ________.

It is difficult to engage in long-term financial planning when inflation is:

In 1929, the CPI equaled 0.171 and in 1930, the CPI equaled 0.167. These data provide evidence of a period of:

Two types of bias that tend to cause the CPI to overstate the "true" rate of inflation are the ________ bias and the ________ bias.

If the consumer price index decreased from 1.66 to 1.59, then it must be the case that ________ relative to prices in the base year.

To obtain a given real rate of return, lenders must charge a ________ nominal interest rate in the face of decreasing inflation.

The "true" costs of inflation are:

Shoe leather costs include the ________ due to the more frequent trips to the bank, the new cash management systems and the expanded employment in banks that inflation causes.

Which of the following is a real quantity?

The tendency for nominal interest rates to be high when inflation is high and low when inflation is low is known as:

To compare the purchasing power of nominal wages in two different years, one must:

Inflation ________ the signals sent by price changes to demanders and suppliers of goods and services.

A consumer expenditure survey reports the following information on entertainment spending:   Using 2015 as the base year, by how much does a "cost of entertainment" index increase between 2015 and 2016?

If the nominal interest rate is 10 percent and the inflation rate is 3 percent, then the real interest rate equals:

The shoe leather costs of inflation include all of the following except:

To obtain a given real rate of return, lenders must charge a ________ nominal interest rate in the face of increasing inflation.

Assume one investor bought a 10-year inflation-protected bond with a fixed annual real rate of 1.5 percent and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2 percent. If inflation over the 10-year period averaged 3 percent, which investor earned a higher real return?

The situation when the price of most goods and services are falling over time is called:

The CPI in 1974 equaled 0.49. The CPI in 1975 equaled 0.54. The rate of inflation between 1974 and 1975 was ________ percent.

The price of a gallon of gasoline was $1.35 in 2000 when the CPI equaled 1.68. The cost of a gallon of gasoline was $2.38 in 2016 when the CPI equaled 2.40. The real cost of a gallon of gasoline between 2000 and 2016: