Economics: The Basics 1st Edition by Mike Mandel

Exercise 1

Say whether each of the following statements is true or false.
a) When the average price level rises, the price of all goods and services goes up.
b) Food is the biggest part of the market basket in the consumer price index.
c) The CPI fell in 1984.
d) If the annual inflation rate is 2 percent, that is equivalent to a $20,000 car going up in price to $20,400 in a year.
e) If the price of gasoline goes up while all other prices stay the same, that's a relative price shift.
f) If a restaurant raises its prices because it is serving bigger portions, that counts as inflation.
g) If the price of corn goes up by 10 percent in a year, and the consumer price index goes up by 12 percent, then the inflation-adjusted price of corn has fallen.
h) Unexpected inflation hurts borrowers.
i) If prices rise by 5 percent a year, that's hyperinflation.