Question 1

If pt is the price of good X in period t,and p0 is the base period price,which of the following is the equation for a simple price index for good X?

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    
A)    . 
B)    . 
C)    . 
D)    A

Question 2

Joanna Williams purchased a one-year Treasury bill at $100.This bond does not have any coupon payment but Joanna will get $105 at maturity.The inflation rate in a year's time is expected to be 1.3%.
A)What is the income yield from this investment?
B)What is the nominal rate of return from this investment?
C)What is the real rate of return from this investment?

Accepted Answer

a.0%
b.5%
c.3.65%

Question 3

Exhibit 19-6.Three firms X,Y,and Z operate in the same industry,although their products have different features and are priced differently.The following table provides the prices and the quantities sold (in units)during the period 2000-2002.   Refer to Exhibit 19-6.Compute the Paasche Index for 2002 if the base period is 2000 and the current period is 2002.

Accepted Answer

A) 94.11 
B) 106.26 
C) 130 
D) 106.07 
A) 94.11 
B) 106.26 
C) 130 
D) 106.07 B

Question 4

Exhibit 19-4.Consider the following data on the prices (in dollars)of three items,A,B,and C,from 2000 through 2002.   Refer to Exhibit 19-4.Compute the unweighted price index for the three items for 2000,using 2001 as the base year.

Accepted Answer

A) 100.08 
B) 98.56 
C) 100.85 
D) 99.92 
A) 100.08 
B) 98.56 
C) 100.85 
D) 99.92

Question 5

Rates of return expressed in nominal terms do not represent a true picture because they are not adjusted for inflation.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 19-5.Firms A,B,and C operate in the market for computers.Each firm's product is popular in the market and distinct from what the other firms offer.The following table shows the prices of laptops from 2005 through 2007.   Refer to Exhibit 19-5.If 2006 is used as the base year,which of the following statements is true?

Accepted Answer

A) The prices in 2007 were 5.02% lower than the prices in 2005. 
B) The price index for 2005 will be 100,as per the unweighted price index. 
C) The unweighted price index for 2007 suggests that laptop prices were 8.17% lower than the prices in 2006,as per the unweighted price index. 
D) The laptop prices in 2005 were 3.48% higher than the prices in 2006,as per the unweighted price index. 
A) The prices in 2007 were 5.02% lower than the prices in 2005. 
B) The price index for 2005 will be 100,as per the unweighted price index. 
C) The unweighted price index for 2007 suggests that laptop prices were 8.17% lower than the prices in 2006,as per the unweighted price index. 
D) The laptop prices in 2005 were 3.48% higher than the prices in 2006,as per the unweighted price index.

Question 7

Exhibit 19-5.Firms A,B,and C operate in the market for computers.Each firm's product is popular in the market and distinct from what the other firms offer.The following table shows the prices of laptops from 2005 through 2007.   Refer to Exhibit 19-5.If 2005 is used as the base year,which of the following statements about the prices of these laptops is true?

Accepted Answer

A) The prices increased by about 4.8% between 2006 and 2007. 
B) The prices were about 8.17% lower in 2007 than in 2005. 
C) The prices increased by about 3.36% from 2005 to 2006. 
D) The increase in the price of firm C's laptop outweighed the fall in the prices of the others so that the overall index for 2006 was greater than 100. 
A) The prices increased by about 4.8% between 2006 and 2007. 
B) The prices were about 8.17% lower in 2007 than in 2005. 
C) The prices increased by about 3.36% from 2005 to 2006. 
D) The increase in the price of firm C's laptop outweighed the fall in the prices of the others so that the overall index for 2006 was greater than 100.

Question 8

Consider the following data on the consumer price index in a country.   a.Compute the annual inflation for 2005.
B)Compute the annual inflation for 2006.

Accepted Answer

The answer of Consider the following data on the consumer...

Question 9

Allen Gibbs purchased 50 shares of ABC Corp. ,each worth $110.If the price of the share increases to $135 after a year,what will be the capital gain if Allen sells all his shares?

Accepted Answer

A) $1,250 
B) $25 
C) $6,750 
D) $5,500 
A) $1,250 
B) $25 
C) $6,750 
D) $5,500

Question 10

Which of the following is true about the comparison between the CPI and the PPI?

Accepted Answer

A) Both indices are based on the same basket of goods and services. 
B) Sales and excise taxes are included in the PPI,but they are not included in the CPI. 
C) The PPI is more commonly used to adjust wages for changes in the cost of living than the CPI. 
D) Unlike the CPI that uses prices people pay,the PPI uses the prices measured at the wholesale level. 
A) Both indices are based on the same basket of goods and services. 
B) Sales and excise taxes are included in the PPI,but they are not included in the CPI. 
C) The PPI is more commonly used to adjust wages for changes in the cost of living than the CPI. 
D) Unlike the CPI that uses prices people pay,the PPI uses the prices measured at the wholesale level.

Question 11

Index numbers provide direct comparisons of prices not only with respect to the base year,but also between non-base years.

Accepted Answer

A) True 
 B)False

Question 12

Consider the following table.It provides the price and quantity data for three brands of a good.   
a.Compute the weighted aggregate price index using the Laspeyres method with 2008 as the base year.
B)Compute the weighted aggregate price index using the Paasche method with 2008 as the base year.
C)Suppose the new price and quantity data was available for the base year of 2000 instead of 2008.Would this lead to a substantial difference between the two indices? Explain your answer.

Accepted Answer

a.105.82
b.105.94
c.Yes,the difference b

Question 13

Which of the following is the correct expression for the Laspeyres price index?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 14

The returns to which of the following investments comprises only on capital gains?

Accepted Answer

A) Shares 
B) Bonds 
C) Real estate investments 
D) Treasury bills 
A) Shares 
B) Bonds 
C) Real estate investments 
D) Treasury bills

Question 15

Exhibit 19-2.Hugh Wallace has the following information regarding three investment options.Each investment option involves the same one-year period.   Refer to Exhibit 19-2.What real percent rate of return will Hugh earn if he invests in option 2?

Accepted Answer

A) -2.5% 
B) 4.58% 
C) 0.96% 
D) -3.37% 
A) -2.5% 
B) 4.58% 
C) 0.96% 
D) -3.37%

Question 16

The real return from investing $100 in a stock for a year is computed to be 2%.If the nominal return from this investment is 3.5%,what is the expected inflation rate?

Accepted Answer

The answer of The real return from investing $100 in...

Question 17

Which of the following investment options is the most profitable in percentage terms?

Accepted Answer

A) A government bond with a coupon payment of $10,purchased at $100 and sold at $90 after a year 
B) A government bond with a coupon payment of $15,purchased at $175,and sold at $155 after a year 
C) A share with a dividend payment of $5,purchased at $50,and sold at $60 after a year 
D) A treasury bill purchased at $160 and sold at $175 after a year 
A) A government bond with a coupon payment of $10,purchased at $100 and sold at $90 after a year 
B) A government bond with a coupon payment of $15,purchased at $175,and sold at $155 after a year 
C) A share with a dividend payment of $5,purchased at $50,and sold at $60 after a year 
D) A treasury bill purchased at $160 and sold at $175 after a year

Question 18

Which of the following statements is true about the comparison between the Laspeyres and Paasche indices?

Accepted Answer

A) The Laspeyres index is more expensive to compute than the Paasche index. 
B) The data requirements are more stringent for the Laspeyres index than for the Paache index. 
C) Unlike the Laspeyres index,the Paasche index incorporates current expenditure patterns of consumers. 
D) Unlike the Paasche index,the Laspeyres index requires that the weights be updated each year and the index numbers be recomputed for all of the previous years. 
A) The Laspeyres index is more expensive to compute than the Paasche index. 
B) The data requirements are more stringent for the Laspeyres index than for the Paache index. 
C) Unlike the Laspeyres index,the Paasche index incorporates current expenditure patterns of consumers. 
D) Unlike the Paasche index,the Laspeyres index requires that the weights be updated each year and the index numbers be recomputed for all of the previous years.

Question 19

Consider the following information regarding the price and quantity of three brands of a good sold in 1999 and 2010.   
a.Compute the weighted aggregate price index using the Laspeyres method with 1999 as the base year.
B)Compute the weighted aggregate price index using the Paasche method with 1999 as the base year.
C)Interpret the result.

Accepted Answer

a.150.35
b.146.09
c.The two indices tend

Question 20

The adjusted close price of a share is now $67.A year back,the adjusted close price of the same share was $50.What is the investment percent return for someone who holds 10 of these shares today?

Accepted Answer

A) 34% 
B) 17% 
C) 20% 
D) 25.37% 
A) 34% 
B) 17% 
C) 20% 
D) 25.37%

If p_t is the price of good X in period t,and p₀ is the base period price,which of the following is the equation for a simple price index for good X?

Exhibit 19-4.Consider the following data on the prices (in dollars)of three items,A,B,and C,from 2000 through 2002. Refer to Exhibit 19-4.Compute the unweighted price index for the three items for 2000,using 2001 as the base year.

Rates of return expressed in nominal terms do not represent a true picture because they are not adjusted for inflation.

Consider the following data on the consumer price index in a country. a.Compute the annual inflation for 2005. B)Compute the annual inflation for 2006.

Allen Gibbs purchased 50 shares of ABC Corp. ,each worth $110.If the price of the share increases to $135 after a year,what will be the capital gain if Allen sells all his shares?

Which of the following is true about the comparison between the CPI and the PPI?

Index numbers provide direct comparisons of prices not only with respect to the base year,but also between non-base years.

Which of the following is the correct expression for the Laspeyres price index?

The returns to which of the following investments comprises only on capital gains?

Exhibit 19-2.Hugh Wallace has the following information regarding three investment options.Each investment option involves the same one-year period. Refer to Exhibit 19-2.What real percent rate of return will Hugh earn if he invests in option 2?

The real return from investing $100 in a stock for a year is computed to be 2%.If the nominal return from this investment is 3.5%,what is the expected inflation rate?

Which of the following investment options is the most profitable in percentage terms?

Which of the following statements is true about the comparison between the Laspeyres and Paasche indices?

The adjusted close price of a share is now $67.A year back,the adjusted close price of the same share was $50.What is the investment percent return for someone who holds 10 of these shares today?

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Discrete Probability Distributions

Continuous Probability Distributions

Sampling and Sampling Distributions

Interval Estimation

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Statistical Inference Concerning Two Populations

Statistical Inference Concerning Variance

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Exam 19: Returns, Index Numbers and Inflation

If pt is the price of good X in period t,and p0 is the base period price,which of the following is the equation for a simple price index for good X?

Exhibit 19-4.Consider the following data on the prices (in dollars)of three items,A,B,and C,from 2000 through 2002. Refer to Exhibit 19-4.Compute the unweighted price index for the three items for 2000,using 2001 as the base year.

Rates of return expressed in nominal terms do not represent a true picture because they are not adjusted for inflation.

Consider the following data on the consumer price index in a country. a.Compute the annual inflation for 2005. B)Compute the annual inflation for 2006.

Allen Gibbs purchased 50 shares of ABC Corp. ,each worth $110.If the price of the share increases to $135 after a year,what will be the capital gain if Allen sells all his shares?

Which of the following is true about the comparison between the CPI and the PPI?

Index numbers provide direct comparisons of prices not only with respect to the base year,but also between non-base years.

Which of the following is the correct expression for the Laspeyres price index?

The returns to which of the following investments comprises only on capital gains?

Exhibit 19-2.Hugh Wallace has the following information regarding three investment options.Each investment option involves the same one-year period. Refer to Exhibit 19-2.What real percent rate of return will Hugh earn if he invests in option 2?

The real return from investing $100 in a stock for a year is computed to be 2%.If the nominal return from this investment is 3.5%,what is the expected inflation rate?

Which of the following investment options is the most profitable in percentage terms?

Which of the following statements is true about the comparison between the Laspeyres and Paasche indices?

The adjusted close price of a share is now $67.A year back,the adjusted close price of the same share was $50.What is the investment percent return for someone who holds 10 of these shares today?

Statistics and Data

Tabular and Graphical Methods

Numerical Descriptive Measures

Basic Probability Concepts

Discrete Probability Distributions

Continuous Probability Distributions

Sampling and Sampling Distributions

Interval Estimation

Hypothesis Testing

Statistical Inference Concerning Two Populations

Statistical Inference Concerning Variance

Chi-Square Tests

Analysis of Variance

Regression Analysis

Inference With Regression Models

Regression Models for Nonlinear Relationships

Regression Models With Dummy Variables

Time Series and Forecasting

Nonparametric Tests

Filters

If p_t is the price of good X in period t,and p₀ is the base period price,which of the following is the equation for a simple price index for good X?