Exam 8: The Price Level and Inflation

In Felixania, cat food constitutes 45% of the typical basket of goods for a typical consumer, dog food constitutes 3%, and all other goods constitute the remaining 52%. Assume the price of cat food rises by 4%, the price of dog food falls by 10%, and the prices for all other goods remain constant. Based on the information given, we can definitely say:

If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI) still assumes they buy the same amount, then:

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

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?

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

You are offered two jobs, one in Chicago paying $67,000 and one in Dallas paying $58,000. The price index in Chicago is 110.8, and in Dallas it is 91.5. If real wages are the only consideration, then:

Your firm expands its output in a time when demand appears to be increasing. Demand for all goods is increasing because of inflation, and consumers want to buy all goods faster because their real purchasing power is falling due to inflation. This situation could indicate that:

The percentage change in any economic variable, including the consumer price index (CPI), is measured by which equation?

The concept of a price index is that:

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

In a particular nation, people buy a completely unique and different set of goods and services every year. None of the goods purchased in the new year are the same as any of the goods purchased in the previous year. Based on this information:

Refer to the following figure when answering the next questions: -Based on the figure, which of the following statements best applies?

A price confusion problem is best described as:

Menu costs of inflation:

As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes:

Quality changes:

If everyone buys the same goods every year and the price of housing rises by 38%:

In some nations the only currency is gold. Someone proposes the argument that if gold were the only currency, there could not be inflation. Would you agree or disagree with this statement? Explain

Three accuracy problems with the consumer price index (CPI) are:

If a Hershey's chocolate bar cost $0.05 in 1921 when the price index was 18 and the same size and weight Hershey's chocolate bar cost $0.05 in 1955 when the price index was 27, then: