Exam 11: Measuring the Cost of Living

Compute how much each of the following items is worth in terms of today's dollars using 177 as the price index for today. a.In 1926, the CPI was 17.7 and the price of a movie ticket was $0.25.

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

Indexation refers to

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.

The price index was 110 in the first year, 100 in the second year, and 96 in the third year. The economy experienced

The inflation rate is defined as the

In the CPI, goods and services are weighted according to

The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.

If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

Table 11-3 The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. Year Price of a Buak Price of a Calculator 2006 \ 24 \ 8 2007 \ 30 \ 12 2008 \ 32 \ 15 -Refer to Table 11-3. The cost of the basket in 2006 was

Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

The consumer price index is used to

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2001 salary in 2006 dollars is

The consumer price index is

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. Year Priee of hamburegers Prife of hat doges 2009 \ 5.00 \ 3.00 2010 5.50 3.30 2011 5.61 3.63 -Refer to Table 11-6. If the base year is 2009, then the consumer price index is

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.

A dollar figure from 1908 is converted into 2008 dollars by dividing the 2008 price level by the 1908 price level, then multiplying by the 1908 dollar figure.