Question 1

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Accepted Answer

A)  rises and the cost of living increases. 
B)  rises and the cost of living decreases. 
C)  falls and the cost of living increases. 
D)  falls and the cost of living decreases. 
A)  rises and the cost of living increases. 
B)  rises and the cost of living decreases. 
C)  falls and the cost of living increases. 
D)  falls and the cost of living decreases. C

Question 2

Indexation refers to

Accepted Answer

A)  a process of adjusting the nominal interest rate so that it is equal to the real interest rate. 
B)  using a law or contract to automatically correct a dollar amount for the effects of inflation. 
C)  using a price index to deflate dollar values. 
D)  an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator. 
A)  a process of adjusting the nominal interest rate so that it is equal to the real interest rate. 
B)  using a law or contract to automatically correct a dollar amount for the effects of inflation. 
C)  using a price index to deflate dollar values. 
D)  an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator. B

Question 3

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about

Accepted Answer

A)  $2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
B)  $2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. 
C)  $2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
D)  $2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. 
A)  $2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
B)  $2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. 
C)  $2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. 
D)  $2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. D

Question 4

Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys.
  
-Refer to Table 24-5. If the base year is 2006, then the inflation rate in 2005 was

Accepted Answer

A)  -44.5%. 
B)  -30.8%. 
C)  7.7%. 
D)  12.5%. 
A)  -44.5%. 
B)  -30.8%. 
C)  7.7%. 
D)  12.5%.

Question 5

Table 24-7. 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.
  
-Refer to Table 24-7. If the base year is 2010, then the consumer price index is

Accepted Answer

A)  100 in 2009, 109 in 2010, and 115 in 2011. 
B)  95.90 in 2009, 100 in 2010, and 107.44 in 2011. 
C)  90.91 in 2009, 100 in 2010, and 106.36 in 2011. 
D)  88.82 in 2009, 100 in 2010, and 107.44 in 2011. 
A)  100 in 2009, 109 in 2010, and 115 in 2011. 
B)  95.90 in 2009, 100 in 2010, and 107.44 in 2011. 
C)  90.91 in 2009, 100 in 2010, and 106.36 in 2011. 
D)  88.82 in 2009, 100 in 2010, and 107.44 in 2011.

Question 6

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

Accepted Answer

A) True 
 B)False

Question 7

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

Accepted Answer

A) True 
 B)False

Question 8

In a period of inflation real interest rates will be greater than nominal interest rates.

Accepted Answer

A) True 
 B)False

Question 9

A decrease in the price of domestically produced nuclear reactors will be reflected in

Accepted Answer

A)  both the GDP deflator and the consumer price index. 
B)  neither the GDP deflator nor the consumer price index. 
C)  the GDP deflator but not in the consumer price index. 
D)  the consumer price index but not in the GDP deflator. 
A)  both the GDP deflator and the consumer price index. 
B)  neither the GDP deflator nor the consumer price index. 
C)  the GDP deflator but not in the consumer price index. 
D)  the consumer price index but not in the GDP deflator.

Question 10

For an imaginary economy, the value of the consumer price index was 140 in 2013, and the inflation rate was 5.0 percent between 2013 and 2014. The consumer price index in 2014 was

Accepted Answer

A)  145.0. 
B)  147.0. 
C)  135.0. 
D)  133.3. 
A)  145.0. 
B)  147.0. 
C)  135.0. 
D)  133.3.

Question 11

If the nominal interest rate is 7 percent and the real interest rate is -2.5 percent, then the inflation rate is

Accepted Answer

A)  -9.5 percent. 
B)  -4.5 percent. 
C)  4.5 percent. 
D)  9.5 percent. 
A)  -9.5 percent. 
B)  -4.5 percent. 
C)  4.5 percent. 
D)  9.5 percent.

Question 12

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

Accepted Answer

A)  98.0. 
B)  102.0. 
C)  104.0. 
D)  151.0. 
A)  98.0. 
B)  102.0. 
C)  104.0. 
D)  151.0.

Question 13

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Accepted Answer

A)  3 percent 
B)  2 percent 
C)  3.3 percent 
D)  12.8 percent 
A)  3 percent 
B)  2 percent 
C)  3.3 percent 
D)  12.8 percent

Question 14

Which of the following is correct?

Accepted Answer

A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates do not always move together. 
D)  Nominal and real interest rates always move in opposite directions. 
A)  Nominal and real interest rates always move together. 
B)  Nominal and real interest rates never move together. 
C)  Nominal and real interest rates do not always move together. 
D)  Nominal and real interest rates always move in opposite directions.

Question 15

Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-5. Using 2009 as the base year, what is the inflation rate in 2010?

Accepted Answer

In 2010 th

Question 16

One of the differences between the GDP deflator and the consumer price index is

Accepted Answer

A)  the GDP deflator includes income earned by American citizens working in foreign countries and the consumer price index is based solely on purchases made in the U.S. 
B)  the consumer price index basket of goods is updated constantly by the Bureau of Labor Statistics whereas the GDP deflator is updated only occasionally. 
C)  the consumer price index includes items not included in the GDP deflator such as airplanes purchased by the Air Force. 
D)  the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers. 
A)  the GDP deflator includes income earned by American citizens working in foreign countries and the consumer price index is based solely on purchases made in the U.S. 
B)  the consumer price index basket of goods is updated constantly by the Bureau of Labor Statistics whereas the GDP deflator is updated only occasionally. 
C)  the consumer price index includes items not included in the GDP deflator such as airplanes purchased by the Air Force. 
D)  the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.

Question 17

Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
-Refer to Scenario 24-3. In real terms, Josh Holloway's income amounts to about what percentage of Sue Holloway's income?

Accepted Answer

A)  71 percent 
B)  141 percent 
C)  165 percent 
D)  198 percent 
A)  71 percent 
B)  141 percent 
C)  165 percent 
D)  198 percent

Question 18

If the nominal interest rate is 5 percent, and the rate of inflation is 3 percent, then the real interest rate is equal to

Accepted Answer

A)  2 percent. 
B)  0.6 percent. 
C)  1.7 percent. 
D)  15 percent. 
A)  2 percent. 
B)  0.6 percent. 
C)  1.7 percent. 
D)  15 percent.

Question 19

In 1954, Mickey Mantle earned $21,000 playing for the New York Yankees. The CPI in 1954 was 26.9, and the CPI in 2010 was 218.06. What is Mickey Mantle's 1954 salary in 2010 dollars?

Accepted Answer

Mickey Mantle's 1954

Question 20

If the cost of transportation increases by 20 percent, then, other things the same, the CPI is likely to increase by about

Accepted Answer

A)  0.3 percent. 
B)  1.7 percent. 
C)  3.4 percent. 
D)  10 percent. 
A)  0.3 percent. 
B)  1.7 percent. 
C)  3.4 percent. 
D)  10 percent.

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Indexation refers to

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2006, then the inflation rate in 2005 was

Table 24-7. 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. -Refer to Table 24-7. If the base year is 2010, then the consumer price index is

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

In a period of inflation real interest rates will be greater than nominal interest rates.

A decrease in the price of domestically produced nuclear reactors will be reflected in

For an imaginary economy, the value of the consumer price index was 140 in 2013, and the inflation rate was 5.0 percent between 2013 and 2014. The consumer price index in 2014 was

If the nominal interest rate is 7 percent and the real interest rate is -2.5 percent, then the inflation rate is

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Which of the following is correct?

One of the differences between the GDP deflator and the consumer price index is

If the nominal interest rate is 5 percent, and the rate of inflation is 3 percent, then the real interest rate is equal to

In 1954, Mickey Mantle earned $21,000 playing for the New York Yankees. The CPI in 1954 was 26.9, and the CPI in 2010 was 218.06. What is Mickey Mantle's 1954 salary in 2010 dollars?

If the cost of transportation increases by 20 percent, then, other things the same, the CPI is likely to increase by about

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

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the 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

Six Debates Over Macroeconomic Policy

Filters

Exam 6: Measuring the Cost of Living

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

Indexation refers to

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2006, then the inflation rate in 2005 was

Table 24-7. 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. -Refer to Table 24-7. If the base year is 2010, then the consumer price index is

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

In a period of inflation real interest rates will be greater than nominal interest rates.

A decrease in the price of domestically produced nuclear reactors will be reflected in

For an imaginary economy, the value of the consumer price index was 140 in 2013, and the inflation rate was 5.0 percent between 2013 and 2014. The consumer price index in 2014 was

If the nominal interest rate is 7 percent and the real interest rate is -2.5 percent, then the inflation rate is

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 percent. What was the real interest rate during this period?

Which of the following is correct?

One of the differences between the GDP deflator and the consumer price index is

If the nominal interest rate is 5 percent, and the rate of inflation is 3 percent, then the real interest rate is equal to

In 1954, Mickey Mantle earned $21,000 playing for the New York Yankees. The CPI in 1954 was 26.9, and the CPI in 2010 was 218.06. What is Mickey Mantle's 1954 salary in 2010 dollars?

If the cost of transportation increases by 20 percent, then, other things the same, the CPI is likely to increase by about

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

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the 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

Six Debates Over Macroeconomic Policy

Filters