Deck 6: Fiscal Policy

Question 1

The consumer price index for a given year measures the cost of living in that year relative to

A) what it was in the base year.
B) what it was in the previous year.
C) the cost of the basic goods and services need to sustain a typical household.
D) the amount spent on goods and services by the randomly selected families in the Consumer Expenditure Survey.
E) the cost of the basic goods and services in the base year.

Answer 1

what it was in the base year.

Question 2

The consumer price index is a measure of the change in prices of a standard basket of

A) all goods and services.
B) goods determined by household expenditure surveys.
C) agricultural goods determined by household expenditure surveys.
D) selected items in wholesale markets.
E) machinery,tools,and new plant.

Answer 2

goods determined by household expenditure surveys.

Question 3

A typical family on the Planet Econ consumes 10 pizzas,7 pairs of jeans,and 20 litres of milk.In 2011,pizzas cost $10 each,jeans cost $40 per pair,and milk costs $3 per litre.In 2012,the price of pizzas went down to $8 each,while the price of jeans and the price of milk remained the same.Between 2011 and 2012,a typical family's cost of living

A) increased by 4.5%.
B) decreased by 4.5%.
C) remained the same.
D) increased by 20%.
E) decreased by 20%.

Answer 3

decreased by 4.5%.

Question 4

If the price index is 130,this means that

A) prices are 130% higher than in the base year.
B) prices are 0.13 times higher than in the base year.
C) prices are 30% higher than in the base year.
D) nominal GDP must be inflated to determine the real GDP.
E) prices are 30% lower than in the base year.

Question 5

The consumer price index attempts to measure changes in the

A) prices of all goods and services produced by the Canadian economy.
B) price of a select market basket of goods and services.
C) spending patterns of urban consumers.
D) spending patterns of all consumers.
E) spending patterns of all producers.

Question 6

The consumer price index for Planet Econ consists of only two items: books and hamburgers.In 2011,the base year,the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each.In 2012,the typical consumer purchased 15 books for $30 each and 30 hamburgers for $3 each.The consumer price index for 2012 on Planet Econ equals

A) 100.
B) 108.
C) 115.
D) 125.
E) 180.

Question 7

If the total expenditures of a typical family were $35,000 per year in 2008 and the exact same basket of goods and services cost $40,000 in the year 2012,the family's cost of living

A) increased by 14%.
B) decreased by 14%.
C) increased by 12.5%.
D) decreased by 12.5%.
E) was unchanged.

Question 8

If the total expenditures of a typical family were $40,000 per year in 2008 and the exact same basket of goods and services cost $45,000 in the year 2012,the family's cost of living

A) increased by 11.1%.
B) decreased by 11.1%.
C) increased by 12.5%.
D) decreased by 12.5%.
E) was unchanged.

Question 9

The consumer price index (CPI)is all of the following EXCEPT the

A) rate of inflation between the current period and the base year.
B) cost of living relative to the base year.
C) average level of prices relative to prices in the base year.
D) consumer price index.
E) cost of a standard basket of goods and services relative to the cost of the same basket in the base year.

Question 10

A typical family on the Planet Econ consumes 10 pizzas,7 pairs of jeans,and 20 litres of milk.In 2011 pizzas cost $10 each,jeans cost $40 per pair,and milk costs $3 per litre.In 2012,the price of pizzas increased to $14 each,while the price of jeans and the price of milk remained the same.Between 2011 and 2012,a typical family's cost of living

A) increased by 9%.
B) decreased by 9%.
C) remained the same.
D) increased by 40%.
E) decreased by 40%.

Question 11

Suppose total expenditures for a typical household in 2009 were $4,500 per month and that the cost of purchasing exactly the same items in 2012 was $6,975 per month.If 2009 is the base year,the consumer price index (CPI)for 2012 equals

A) 65.
B) 100.
C) 121.
D) 132.
E) 155.

Question 12

Suppose total expenditures for a typical household in 2009 were $2,500 per month and that the cost of purchasing exactly the same items in 2012 was $3,200 per month.If 2009 is the base year,the consumer price index (CPI)for 2012 equals

A) 78.
B) 100.
C) 128.
D) 131.
E) 145.

Question 13

Suppose total expenditures for a typical household in 2002 were $5,500 per month,while the cost of purchasing exactly the same items in 2012 was $6,875.If 2002 is the base year,the consumer price index (CPI)for the year 2012 equals

A) 80.
B) 100.
C) 120.
D) 125.
E) 130.

Question 14

Suppose total expenditures for a typical household in 2009 were $3,300 per month and that the cost of purchasing exactly the same items in 2012 was $3,993 per month.If 2009 is the base year,the consumer price index (CPI)for 2012 equals

A) 76.
B) 83.
C) 100.
D) 121.
E) 145.

Question 15

Suppose total expenditures for a typical household in 2002 were $5,500 per month,while the cost of purchasing exactly the same items in 2012 was $7,150.If 2002 is the base year,the consumer price index (CPI)for 2012 equals

A) 83.
B) 100.
C) 120.
D) 125.
E) 130.

Question 16

Suppose total expenditures for a typical household in 2002 were $2,500 per month,while the cost of purchasing exactly the same items in 2012 was $3,000.If 2002 is the base year,the consumer price index (CPI)for the year 2012 equals

A) 83.
B) 100.
C) 120.
D) 125.
E) 130.

Question 17

The measure of the cost of a standard basket of goods and services in any period,relative to the cost of the same basket of goods and services in the base year,is called the

A) cost-of-living indicator.
B) consumer production index.
C) consumer price index.
D) consumption production index.
E) cost-of-production index.

Question 18

The consumer price index for the current year measures the cost of a standard basket in the ________ year relative to the cost of the same basket in the ________ year.

A) current;base
B) current;current
C) base;index
D) base;current
E) base;base

Question 19

The consumer price index (CPI)is a measure of the

A) real wage.
B) price of a specific good or service.
C) rate of inflation.
D) average level of prices relative to prices in the base year.
E) rate of deflation.

Question 20

The consumer price index for Planet Econ consists of only two items: books and hamburgers.In 2011,the base year,the typical consumer purchased 10 books for $20 each and 200 hamburgers for $1 each.In 2012,the typical consumer purchased 12 books for $23 each and 300 hamburgers for $1.15 each.The consumer price index for 2012 on Planet Econ equals

A) 100.
B) 115.
C) 125.
D) 135.
E) 155.

Question 21

The consumer price index for Macroland consists of only two items: books and hamburgers.In 2011,the base year,the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each.In 2012,the typical consumer purchased 15 books for $30 each and 30 hamburgers for $3 each.The consumer price index for 2012 on Planet Econ equals

A) 100.
B) 108.
C) 115.
D) 125.
E) 180.

Question 22

Deflation is a situation in which the

A) quantity of goods and services produced is increasing over time.
B) quantity of goods and services produced is decreasing over time.
C) prices of most goods and services are falling over time.
D) prices of most goods and services are rising over time.
E) prices of most goods and services are not changing over timE.

Question 23

The consumer price index (CPI)in 1974 was 26.2.The CPI in 1975 was 29.The rate of inflation between 1974 and 1975 was

A) 4.9%.
B) 5.4%.
C) 9.0%.
D) 9.7%.
E) 10.7%.

Question 24

If the consumer price index is 125 at the end of 2011 and is 150 at the end of 2012,then the inflation rate for 2012 is

A) 15%.
B) 20%.
C) 25%.
D) 125%.
E) 150%.

Question 25

A situation of negative inflation is called

A) recession.
B) expansion.
C) boom.
D) deflation.
E) disinflation.

Question 26

The consumer price index (CPI)in 1930 was 9.1.The CPI in 1931 was 8.2.The rate of inflation between 1930 and 1931 was

A) - 9.9%.
B) - 10.8%.
C) 1.5%.
D) 10.8%.
E) 9.9%.

Question 27

The consumer price index (CPI)in 1975 was 29.The CPI in 1976 was 31.1.The rate of inflation between 1975 and 1976 was

A) 3.00%.
B) 5.26%.
C) 6.75%.
D) 7.24%.
E) 8.70%.

Question 28

If the consumer price index (CPI)decreases,

A) the purchasing power of money decreases.
B) a dollar will buy fewer goods and services.
C) real income equals nominal income.
D) there is inflation.
E) there is deflation.

Question 29

Inflation exists when

A) the prices of ALL goods and services are rising.
B) the purchasing power of money is increasing.
C) the average price level is rising,although some prices may be falling.
D) the prices of basic necessities are increasing.
E) wages and the price of oil are rising.

Question 30

The consumer price index (CPI)in year one was 155.The CPI in year two was 164.The rate of inflation between years one and two was

A) 4.0%.
B) 5.5%.
C) 5.8%.
D) 6.4%.
E) 9.0%.

Question 31

The annual percentage rate of change in the price level is the

A) relative price.
B) Fisher effect.
C) price level.
D) cost of living.
E) rate of inflation.

Question 32

Suppose total expenditures for a typical household in 2008 were $2,000 per month and that the cost of purchasing exactly the same items in 2012 was $3,200 per month.If 2008 is the base year,the consumer price index (CPI)for 2012 equals

A) 62.5.
B) 100.
C) 125.
D) 148.
E) 160.

Question 33

The consumer price index for Macroland consists of only two items: books and pizzas.In 2011,the base year,the typical consumer purchased 5 books for $55 each and 20 pizzas for $6 each.In 2012,the typical consumer purchased 10 books for $80 each and 30 pizzas for $7 each.The consumer price index for 2012 in Macroland equals

A) 100.
B) 108.
C) 115.
D) 137.
E) 185.

Question 34

If the consumer price index is 135 at the end of 2011 and,at the end of 2012,it is 142,then during 2012 the economy experienced

A) deflation.
B) inflation.
C) hyperinflation.
D) indexing.
E) deflating.

Question 35

Suppose total expenditures for a typical household in 2011 were $2,000 per month and that the cost of purchasing exactly the same items in 2012 was $2,500 per month.If 2011 is the base year,the consumer price index (CPI)for 2012 equals

A) 142.
B) 125.
C) 100.
D) 80.
E) 64.

Question 36

The consumer price index (CPI)in year one was 145.The CPI in year two was 151.The rate of inflation between years one and two was

A) 4.0%.
B) 4.1%.
C) 4.5%.
D) 5.1%.
E) 6.0%.

Question 37

The consumer price index for Macroland consists of only two items: pizzas and soft drinks.In 2011,the base year,the typical consumer purchased 10 pizzas for $5 each and 25 soft drinks for $2 each.In 2012,the typical consumer purchased 15 pizzas for $8 each and 30 soft drinks for $3 each.The consumer price index for 2012 on Macroland equals

A) 100.
B) 108.
C) 115.
D) 135.
E) 155.

Question 38

The consumer price index (CPI)in 1931 was 8.2.The CPI in 1932 was 7.5.The rate of inflation between 1931 and 1932 was

A) - 8.5%.
B) - 9.3%.
C) 1.4%.
D) 6.6%.
E) 9.3%.

Question 39

The rate of inflation is the

A) price level.
B) consumer price index.
C) annual percentage change in the price level.
D) the average price of a given class of goods or services relative to the price of the same goods and services in a base year.
E) the average price of a class of goods or services that change in any period relative to the prices of the goods or services that have not changed since the base year.

Question 40

Consumers in an economy buy only three general types of products,X,Y,and Z.Changes in the prices of these items from year 1 to year 2 are shown below:
Using year 1 as a base,the value of the country's consumer price index in year 2 is

A) 89.7.
B) 100.
C) 105.2.
D) 106.3.
E) 111.5.

Question 41

If the consumer price index in 1980 was 44.0 (2002 is the base period)and it was 49.5 in 1981,what is the best estimate of the rate of inflation from 1980 to 1981?

A) 8.5%.
B) 9.4%.
C) 11.1%.
D) 12.5%.
E) 14.4%.

Question 42

A quantity measured in terms of current dollar values is called a(n)_______ quantity.

A) nominal
B) real
C) deflated
D) indexed
E) relative

Question 43

This table shows the values of the Canadian consumer price index (CPI)for the years 1998 - 2005.

Using the data in the table above,the rate of inflation between 2002 and 2003 was

A) 2.8%.
B) 2.7%.
C) 3.2%.
D) 4.2%.
E) 5.1%.

Question 44

This table shows the values of the Canadian consumer price index (CPI)for the years 1998 - 2005.

Using the data in the table above,the rate of inflation between 2004 and 2005 was

A) 1.21%.
B) 1.76%.
C) 2.15%.
D) 2.20%.
E) 2.34%.

Question 45

This table shows the values of the Canadian consumer price index (CPI)for the years 1998 - 2005.

Using the data in the table above,the rate of inflation between 1998 and 1999 was

A) 1.54%.
B) 1.68%.
C) 1.78%.
D) 1.75%.
E) 1.72%.

Question 46

Refer to the above table.Inflation occurs between

A) years 1 and 2.
B) years 2 and 4.
C) years 4 and 5.
D) years 5 and 6.
E) none of the years.

Question 47

This table shows the values of the Canadian consumer price index (CPI)for the years 1998 - 2005.

Using the data in the table above,the rate of inflation between 2003 and 2004 was

A) 0.96%.
B) 1.85%.
C) 2.85%.
D) 1.21%.
E) 1.81%.

Question 48

This table shows the values of the Canadian consumer price index (CPI)for the years 1998 - 2005.

Using the data in the table above,the rate of inflation between 2003 and 2005 was

A) 3.9%.
B) 4.1%.
C) 2.4%.
D) 1.7%.
E) 3.2%.

Question 49

A quantity measured in terms of constant dollar values is called a ______ quantity.

A) nominal
B) relative
C) current
D) base-year
E) real

Question 50

This table shows the values of the Canadian consumer price index (CPI)for the years 1998 - 2005.

Using the data in the table above,the rate of inflation between 2000 and 2001 was

A) 2.25%.
B) 2.52%.
C) 2.45%.
D) 2.83%.
E) 2.91%.

Question 51

A real quantity is a quantity measured

A) in terms of constant dollar values.
B) in terms of current dollar values.
C) by the average quantity.
D) using real prices.
E) in nominal terms.

Question 52

A nominal quantity is measured

A) in physical terms.
B) in terms of current dollar values.
C) using the consumer price index.
D) by deflating.
E) by indexing.

Question 53

If the consumer price index increased from 80 to 84,the rate of inflation is

A) 4%.
B) 5%.
C) 10%.
D) 20%.
E) 30%.

Question 54

In 1967,the Canadian consumer price index was 18 (2002 = 100)and in 1999 it was 93.From these figures we can conclude that Canadian prices increased by about __________ between 1967 and 1999.

A) 8.1%
B) 18.1%
C) 210%
D) 323%
E) 417%

Question 55

Refer to the above table.From year 3 to year 4,the price level is

A) increasing.
B) decreasing.
C) both increasing and decreasing.
D) constant.
E) undetermined.

Question 56

Consumers in an economy buy only three general types of products,A,B,and C.Changes in the prices of these items from year 1 to year 2 are shown below:

Using year 1 as the base year,the country's inflation rate,from year 1 to year 2 is

A) 0%
B) 3.9%
C) 5.2%
D) 6.3%
E) 7.8%

Question 57

Consumers in an economy buy only three general types of products,X,Y,and Z.Changes in the prices of these items from year 1 to year 2 are shown below:
Using year 1 as the base year,the country's inflation rate,from year 1 to year 2 is

A) 0%
B) 3.9%
C) 5.2%
D) 7.8%
E) 11.5%

Question 58

This table shows the values of the Canadian consumer price index (CPI)for the years 1998 - 2005.

The base year for the calculations of the consumer price indexes in the table above is

A) 1998.
B) 2000.
C) 2002.
D) 2004.
E) not known.

Question 59

Consumers in an economy buy only three general types of products,A,B,and C.Changes in the prices of these items from year 1 to year 2 are shown below:

Using year 1 as the base year,the country's inflation rate,from year 1 to year 2 is

A) 0%
B) 3.9%
C) 5.2%
D) 6.3%

Question 60

Refer to the above table.From year 1 to year 2,

A) there is inflation.
B) prices are stable.
C) there is deflation.
D) there is hyperinflation.
E) the price index is unchanged.

Question 61

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI)increased by 20%.After five years,this family's nominal income ________ and their real income ________.

A) decreased;decreased
B) decreased;increased
C) increased;did not change
D) increased;increased
E) increased;decreased

Question 62

A year's tuition at an Ontario university cost $250 in 1972,when the consumer price index (CPI)was 21.9.The cost of a year's tuition at the same university cost $3,000 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of tuition

A) increased.
B) decreased.
C) remained constant.
D) may have either increased or decreased.
E) cannot be determined.

Question 63

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index is called

A) a substitution bias.
B) the Fisher effect.
C) deflating.
D) indexing.
E) a quality adjustment.

Question 64

The price of a litre of gasoline was $0.12 in 1972,when the consumer price index (CPI)was 21.9.The cost of a litre of gasoline was $0.50 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of a litre of gasoline

A) increased.
B) decreased.
C) remained constant.
D) may have either increased or decreased.
E) cannot be determined.

Question 65

The wage paid to workers measured in terms of real purchasing power is called the

A) nominal wage.
B) cost of living.
C) minimum wage.
D) real wage.
E) effective wagE.

Question 66

The consumer price index (CPI)equals 100 in year one and 115 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

A) $13.04.
B) $15.00.
C) $15.15.
D) $16.15.
E) $17.25.

Question 67

A labour contract provides for a first-year wage of $10 per hour,and specifies that the real wage will rise by 3% in the second year of the contract.The consumer price index (CPI)is 100 in the first year and 107 in the second year.What dollar wage must be paid in the second year?

A) $10.00 per hour.
B) $10.30 per hour.
C) $10.70 per hour.
D) $11.00 per hour.
E) $11.02 per hour.

Question 68

Deflating a nominal quantity is the process of dividing a _______ quantity by a ______ in order to express the quantity in ______ terms.

A) nominal;real quantity;nominal
B) nominal;nominal quantity;real
C) real;nominal quantity;real
D) nominal;price index;real
E) real;price index;nominal

Question 69

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI)increased by 15%.After five years,this family's nominal income ________ and their real income ________.

A) decreased;decreased
B) decreased;increased
C) increased;did not change
D) increased;increased
E) increased;decreased

Question 70

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI)increased by 12%.After five years,this family's nominal income ________ and their real income ________.

A) decreased;decreased
B) decreased;increased
C) increased;did not change
D) increased;increased
E) increased;decreased

Question 71

A labour contract provides for a first-year wage of $15 per hour,and specifies that the real wage will rise by 2% in the second year of the contract.The consumer price index (CPI)is 100 in the first year and 109 in the second year.What dollar wage must be paid in the second year?

A) $15.00 per hour.
B) $15.30 per hour.
C) $16.09 per hour.
D) $16.68 per hour.
E) $17.09 per hour.

Question 72

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI)was 21.9.A college graduate in 2000 found a job paying $30,000,when the CPI was 95.4.The 1972 graduate's job paid ________ in nominal terms and ________ in real terms than the 2000 graduate's job.

A) more;less
B) more;more
C) less;the same
D) less;more
E) less;less

Question 73

Indexing is the process of

A) dividing a real quantity by a price index.
B) dividing a nominal quantity by a price index.
C) increasing a nominal quantity by an amount equal to the percentage change in a price index.
D) increasing a real quantity by an amount equal to the percentage change in a price index.
E) measuring the average price of a given class of goods or services relative to the price of the same goods and services in a base year.

Question 74

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI)was 21.9.A college graduate in 2000 found a job paying $32,000,when the CPI was 95.4.The 1972 graduate's job paid _______ in nominal terms and ______ in real terms than the 2000 graduate's job.

A) more;less
B) more;more
C) less;the same
D) less;more
E) less;less

Question 75

The consumer price index (CPI)equals 100 in year one and 105 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

A) $14.29.
B) $15.00.
C) $15.05.
D) $15.75.
E) $16.05.

Question 76

If the consumer price index (CPI)was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $37,000 in 2007,then between 2002 and 2007,real household income

A) increased.
B) decreased.
C) was constant.
D) may have increased or decreased.
E) can not be determined.

Question 77

If the consumer price index (CPI)was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $39,025 in 2007,then between 2002 and 2007,real household income

A) increased.
B) decreased.
C) was constant.
D) may have increased or decreased.
E) can not be determined.

Question 78

The real wage is the wage

A) measured in current dollars.
B) required to maintain a minimum standard of living.
C) employers are required to pay workers.
D) measured in terms of purchasing power.
E) the federal government sets as the minimum wagE.

Question 79

The process of dividing a nominal quantity by a price index in order to express the quantity in real terms is called

A) deflating.
B) negative inflation.
C) indexing.
D) depressing.
E) hyperinflation.

Question 80

A factory worker earned $10 an hour in 1985,when the consumer price index (CPI)was 63.0.The same factory worker was earning $15 an hour in 1990,when the CPI was 78.4.From 1985 to 1990,the factory worker's hourly real wage

A) increased from $6.30 to $11.76.
B) increased from $15.87 to $19.13.
C) remained constant.
D) increased from $10 to $15.
E) decreased from $15 to $10.