Deck 16: The Consumer Price Index and Government Statistics

Question 1

Athletes make more now, but prices are also higher than in the past. In 2013 the basketball player Stephen Curry signed a contract for $44 million with the Golden State Warriors. How much is this in 1975 dollars? (The CPI was 53.8 in 1975 and was 233.9 in 2013.)

A) About $308 million
B) About $37 million
C) About $90 million
D) About $26 million
E) About $16 million

Answer 1

About $16 million

Question 2

The 2008 CPI (1982-84 = 100) was 218.8. The CPI component for educational books and supplies was 459. This means that

A) educational books and supplies costs rose 459%, while overall prices rose only 218.8%.
B) educational books and supplies costs rose 359%, while overall prices rose only 118.8%.
C) the average educational books and supplies cost was more than four times as high in 2008 as it was in the 1982-84 period, while, overall, prices were only about 2.2 times as high.
D) Both "educational books and supplies costs rose 459%, while overall prices rose only 218.8%" and "the average educational books and supplies cost was more than four times as high in 2008 as it was in the 1982-84 period, while, overall, prices were only about 2.2 times as high" are true.
E) Both "educational books and supplies costs rose 359%, while overall prices rose only 118.8%" and "the average educational books and supplies cost was more than four times as high in 2008 as it was in the 1982-84 period, while, overall, prices were only about 2.2 times as high" are true.

Answer 2

Both "educational books and supplies costs rose 359%, while overall prices rose only 118.8%" and "the average educational books and supplies cost was more than four times as high in 2008 as it was in the 1982-84 period, while, overall, prices were only about 2.2 times as high" are true.

Question 3

A gallon of milk cost $2.48 in 1995, while a gallon of milk cost $3.73 in 2016. Using 1995 as the base year, what is the gallon of milk index number for 2016?

A) 0.66
B) $0.66
C) $1.50
D) 66
E) 150

Answer 3

150

Question 4

The Consumer Price Index (1982-1984 = 100) in 2016 was about 237.1. The CPI in 1930 (same base) was 16.7. The New York Yankees paid Babe Ruth $80,000 in 1930, an enormous salary for an athlete in those days. The buying power of the Babe's salary in 2016 dollars is about:

A) $594,042.
B) $1,077,365.
C) $1,135,808.
D) $16,656,000.
E) $17,992,000.

Question 5

When Julie entered college in 2011, she dreamed of making $50,000 when she graduated. The CPI in 2011 was 226.4. Julie graduated in 2016. (Thinking about money rather than studies slowed her progress a bit.) The 2016 CPI was 237.1. What must Julie earn in order to have the same buying power that $50,000 had in 2011?

A) About $105,800
B) About $94,800
C) About $52,400
D) About $44,800
E) It can't be calculated from the information given.

Question 6

In-state tuition and fees at Virginia Commonwealth University (VCU) was $9517 for the 2011-12 academic year. The CPI for 2011 was 224.9 and the CPI for 2001 was 177.1. What is the 2011-2012 tuition in 2001 dollars?

A) $1270
B) $1642
C) $7494
D) $7875
E) $12,086

Question 7

A pound of ground coffee cost $2.47 in 1992 and $6.50 in 2016. The ground coffee price index number (1992 = 100) for 2016 is:

A) (6.50/2.47) × 100 = 263.2.
B) (2.47/6.50) × 100 = 38.0.
C) (6.50 - 2.47) × 100 = 403.0.
D) (6.50 - 2.47)/(2016-1992) = 0.168.
E) (6.50 - 2.47)/(2016-1992) × 100 = 16.8.

Question 8

The breakfast fixed market basket consists of one gallon of milk, one pound of sliced bacon, and one dozen eggs. In 1995, the gallon of milk cost $2.48, the pound of sliced bacon cost $1.99, and the dozen eggs cost $0.93. In 2011, the gallon of milk cost $3.57, the pound of sliced bacon cost $4.63, and the dozen eggs cost $1.77. What is the breakfast fixed market basket price index in 2011 using 1995 as the base year?

A) 185
B) 54
C) $1.85
D) $0.54
E) 0.54

Question 9

The average price of a pound of bananas was 36.2 cents in 1981 and 59.0 cents in 2016. What is the bananas index number (1981 = 100) for 2016?

A) 1.63
B) 1.63 cents
C) 22.8 cents
D) 62.9
E) 162.9

Question 10

There are separate CPIs for various components of the market basket. For example, the CPI for new motor vehicles (1982-84 = 100) was 132.4 in 2008.
If there were no adjustments for quality improvements, then how much did new motor vehicle prices increase from the base period to 2008?

A) By 24%
B) By 132.4%
C) By 32.4%
D) None of the answers are correct.
E) Impossible to say because the CPI doesn't measure prices.

Question 11

Most economists agree that the Consumer Price Index slightly overstates the rate of inflation (the decline in the dollar's buying power). The main reason is that the

A) CPI is not based on a randomized comparative experiment.
B) CPI uses 1982-84 = 100, and this has become out of date.
C) CPI market basket is just a guess at what people really buy; it should be replaced by a random sample of goods and services.
D) CPI doesn't use a standard score, so changes in the standard deviation affect the value of the CPI.
E) fixed market basket doesn't adjust quickly enough for new products and improvements in quality.

Question 12

In 2011, consumers tended to buy bigger-screen TV sets than they did in the 1982-84 base period. How does the CPI reflect this fact?

A) It doesn't because it uses a fixed market basket.
B) It can't possibly because, if it did, the price of TVs would have gone up instead of down.
C) Every month, there is a new Consumer Expenditure Survey, which records what consumers actually buy, so the market basket changes every month.
D) The Bureau of Labor Statistics (BLS) adjusts the actual price to subtract out the part that pays for improved quality.
E) The BLS corrects by using a different base period.

Question 13

A pair of ballet slippers cost $35.00 in 1990; a pair of the same type of slippers costs $105.00 in 2008. Using 1990 as the base year, what is the ballet slipper index number for 2008?

A) 300
B) 0.33
C) 3.0
D) $35.00
E) $105.00

Question 14

The 2008 CPI (1982-84 = 100) was 218.8 but the component of the CPI for personal computers was 92.9. There were great improvements in quality and features in personal computers between 1982-84 and 2008. We can say that

A) the actual average price of a personal computer in 2008 was only 92.9% of the average price in 1982-84.
B) the actual average price of a personal computer in 2008 was 218.8% of the average price in 1982-84.
C) if a personal computer sold for $1000 in 1982-84, that same computer would sell for only $929 in 2008.
D) Both "the actual average price of a personal computer in 2008 was only 92.9% of the average price in 1982-84" and "if a personal computer sold for $1000 in 1982-84, that same computer would sell for only $929 in 2008" are true.
E) Both "the actual average price of a personal computer in 2008 was 218.8% of the average price in 1982-84" and "if a personal computer sold for $1000 in 1982-84, that same computer would sell for only $929 in 2008" are true.

Question 15

To graphically show how the Consumer Price Index has changed over the last 50 years, one should draw a

A) bar graph with horizontal bars of equal widths.
B) pie chart.
C) line graph with time on the vertical axis.
D) line graph with time on the horizontal axis
E) scatterplot.

Question 16

Having taken statistics, you know that a graph that shows how the cost of attending your school has increased since 1980 should show the cost in real terms. To do this, you will

A) report cost on the standard score scale (compute standard scores of costs).
B) use the CPI to adjust each year's cost for changes in the buying power of a dollar.
C) be sure to put cost on the horizontal axis of your graph.
D) be sure to put cost on the vertical axis of your graph.
E) use the median cost rather than the mean cost.

Question 17

The governments of all developed nations produce large volumes of data on economic and social issues. Canada, like most countries, has a single national statistical office (Statistics Canada) that is responsible for these data. In the United States,

A) all federal statistics are handled by the Bureau of Labor Statistics.
B) there are separate statistical offices in each federal agency (more than 70 of them).
C) all data are produced by the states-there are no federal statistical agencies.
D) all data are produced by private firms-there are no federal statistical agencies.

Question 18

If the Consumer Price Index (1982-1984 = 100) is 237.1, this means that:

A) prices have increased 137.1 percent so that it now costs $237.10 to buy goods and services that cost $100 in 1982-1984.
B) prices have increased 237.1 percent so that it now costs $337.10 to buy goods and services that cost $100 in 1982-1984.
C) since 1982-1984 = 100, the current price is (1982-1984)/237.1 = 1898/237.1 = $8.00.
D) a mistake has been made because 1982-1984 = 1,898 is much greater than 100.
E) a mistake has been made because an index number can only take values between 0 and 1.

Question 19

Some people buy the stock of small companies. The Russell 2000 index, which tracks the price of such shares, was 772 on December 31, 2007. On December 31, 2015, the index was 1,200. What percent increase is this?

A) 438 percent
B) 43.8 percent
C) 35.7 percent
D) 55.4 percent

Question 20

The price per pound of iceberg lettuce has fluctuated quite a bit over the last few years. Here it is in dollars, from 2004 to 2012:

In which of these years was the Iceberg Lettuce Index Number (2004 = 100) equal to 114.4?

A) 2005
B) 2007
C) 2009
D) 2011
E) 2012

Question 21

In the good old days (1986), the U.S. dollar was worth 1.85 Swiss Francs. Over two decades later in 2012, the dollar was worth 0.91 Swiss Francs. The value of the dollar in Swiss Francs went down by about

A) 49%.
B) 51%.
C) 94%.
D) 203%.
E) Can't tell without knowing the CPI for 1986.

Question 22

The federal minimum wage was $7.25 an hour after it was increased in 2009. In 1980, the minimum wage was $3.25 an hour. The CPI (1982-84 = 100) was 82.4 in 1980 and was 214.5 in 2009. Which of the following is true?

A) The 1980 minimum wage is about $8.46 in 2009 dollars, so the minimum wage has gone down in real terms.
B) The 1980 minimum wage is about $8.46 in 2009 dollars, so the minimum wage has gone up in real terms.
C) The 1980 minimum wage is about $1.25 in 2009 dollars, so the minimum wage has gone down in real terms.
D) The 1980 minimum wage is about $1.25 in 2009 dollars, so the minimum wage has gone up in real terms.
E) The 1980 minimum wage is about $4.50 in 2009 dollars, so the minimum wage has gone up in real terms.

Question 23

Suppose the CPI (Consumer Price Index) with respect to some unknown base period was 89 in 1985, 115 in 1990, and 127 in 1993. The CPI rose steadily during this period. The base period used

A) must have been between 1985 and 1990.
B) must have been between 1990 and 1993.
C) must have been after 1993.
D) is 1982-84, as usual.
E) Can't tell from the information given.

Question 24

There are separate CPIs for various components of the market basket. For example, the CPI for new motor vehicles (1982-84 = 100) was 132.4 in 2008.
If there were adjustments in the new motor vehicle index due to quality improvements , would the actual increase in new motor vehicle prices be greater, smaller, or the same as in the previous question?

A) Greater
B) Smaller
C) The same
D) Could be either greater or smaller.

Question 25

You have decided to buy a yacht, specifically, a Nautor's Swan 68 sailing yacht. This lovely boat cost $384,300 in 1976, when the CPI was 57. The CPI at the beginning of 2000 was about 168, and the yacht then cost $2,300,000. What is the 1976 yacht price expressed in 2000 dollars?

A) $130,388
B) $780,357
C) $1,132,674
D) $6,778,947

Question 26

The 2007 in-state tuition at the university in the previous question was $7884. So your calculation in the previous question shows that, in the 1989-2007 period,

A) tuition stayed the same in real terms.
B) tuition went up in real terms.
C) tuition went down in real terms.
D) Can't tell without more information.

Question 27

The Consumer Price Index (1982-84 = 100) was about 207 in 2007. In 1989, the CPI was 124. Tuition for in-state students at one Big Ten university was $2032 in 1989. In 2007 dollars, this tuition is equivalent to

A) 2032 × (2007/1989) = $2050.
B) 2032 × (207/100) = $4206.
C) 2032 × (124/207) = $1217.
D) 2032 × (207/124) = $3392.

Question 28

A recent monthly press release on the Consumer Price Index says: "The Consumer Price Index for All Urban Consumers (CPI-U) dropped 0.1 percent in August, before seasonal adjustment, to a level of 218.8 (1982-84 = 100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today."
What does "1982-84 = 100" mean here?

A) The CPI did not exist before 1982.
B) The CPI increased by 100 between 1982 and 1984.
C) The CPI measures prices relative to what they were in the years 1982 to 1984.
D) To find the CPI, start with 1982-84 prices and add 100.

Question 29

A recent monthly press release on the Consumer Price Index says: "The Consumer Price Index for All Urban Consumers (CPI-U) dropped 0.1 percent in August, before seasonal adjustment, to a level of 218.8 (1982-84 = 100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today."
The CPI was 208.5 in September 2007 and 218.8 in September, 2008. By what percent did the CPI increase in this 12-month period?

A) 0.05%
B) 0.49%
C) 4.9%
D) 49.4%
E) 104.9%

Question 30

A gallon of unleaded gasoline cost $1.15 in 1995 (CPI = 152.4), while a gallon of gasoline cost $1.99 in 2016 (CPI = 237.1).
After correcting for inflation, has the value of a gallon of unleaded gasoline changed from 1995 to 2016?

A) When converting $1.15 to 2016 dollars, the resulting amount is less than $1.99, so the value of a gallon of unleaded gasoline has risen.
B) When converting $1.15 to 2016 dollars, the resulting amount is $1.99, so the value of a gallon of unleaded gasoline has not changed.
C) When converting $1.15 to 2016 dollars, the resulting amount is more than $1.99, so the value of a gallon of unleaded gasoline has actually decreased.
D) There is not enough information provided to answer this question.

Question 31

A gallon of unleaded gasoline cost $1.15 in 1995 (CPI = 152.4), while a gallon of gasoline cost $1.99 in 2016 (CPI = 237.1).
What amount in 2016 has the same buying power as $1.15 in 1995?

A) $1.15
B) $1.79
C) $1.99
D) $3.89
E) $3.61