Question 1

Constructing the CPI involves which of the following stages?
I. conducting the monthly price survey
Ii. converting the CPI to an international index
Iii. selecting CPI market basket

Accepted Answer

A)  i only
B)  ii only
C)  iii only
D)  i and iii
E)  i, ii, and iiiF) B) and C)
G) A) and D)

Question 2

The formula for the CPI is

Accepted Answer

A)  (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at next year's prices) × 100.
B)  (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices) × 100.
C)  (Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current period prices) × 100.
D)  (Cost of CPI market basket this year × Cost of CPI market basket at base period prices) ÷ 100.
E)  (Cost of CPI market basket this year × Cost of CPI market basket at base period prices) × 100.F) A) and E)
G) C) and E)

Question 3

An example of the commodity substitution bias in the calculation of the CPI is a price increase in

Accepted Answer

A)  turkey when the price of chicken doesn't rise.
B)  a GPS unit versus a AAA map book.
C)  a 2012 Toyota Camry versus a 2005 Honda Civic.
D)  etexts versus used books bought through Craigslist.
E)  new homes because people's incomes have increased.F) A) and E)
G) A) and C)

Question 4

Suppose the base reference period is 1982-1984. If your nominal wage rate is $8.00 per hour when the CPI is 180, what is your real wage rate in 1982-1984 dollars?

Accepted Answer

The real wage rate equals 100 ...

Question 5

When the nominal price of a good increases over time, must its real price also increase?

Accepted Answer

No, even though the nominal price of a g...

Question 6

The quality change bias is most likely to put ________ into the CPI and so ________ the inflation rate.

Accepted Answer

A)  a downward bias; understate
B)  an upward bias; understate
C)  an upward bias; overstate
D)  a downward bias; overstate
E)  a random bias; randomly overstate or understateF) None of the above
G) B) and E)

Question 7

What, if any, is the impact of the CPI bias on government spending and taxes?

Accepted Answer

About one third of government outlays, s...

Question 8

The price survey of the goods contained in the CPI market basket is conducted

Accepted Answer

A)  every ten years, along with the Census.
B)  infrequently, because of its high cost.
C)  every year.
D)  monthly.
E)  every quarter.F) None of the above
G) A) and D)

Question 9

Suppose the CPI in 1983 is 100 and the CPI this year is 172. These values for the CPI mean that

Accepted Answer

A)  inflation between the two years was 172 percent.
B)  typically, a good whose price was $100 in 1983 had a price of $172 this year.
C)  typically, a good whose price was $172 in 1983 had a price of $100 this year.
D)  typically, a good whose price was $100 in 1983 had a price of $139 this year.
E)  typically, a good whose price was $100 in 1983 had a price of $58 this year.F) A) and B)
G) B) and D)

Question 10

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2011. The inflation rate in Syldavia from 2011 to 2012 was

Accepted Answer

A)  8.0 percent.
B)  8.4 percent.
C)  3.0 percent.
D)  4.0 percent.
E)  10.3 percent.F) C) and E)
G) All of the above

Question 11

If you are earning $20,000 this year and the CPI is 165, your real income in base year prices is

Accepted Answer

A)  $121.21.
B)  $12,121.21.
C)  $20,000.
D)  $16,500.
E)  $33,000.F) A) and B)
G) B) and C)

Question 12

When the price of broccoli increase relative to cauliflower, people who buy fresh vegetables respond by buying more cauliflower and fewer broccoli. As a result, the CPI has a

Accepted Answer

A)  new goods bias.
B)  quality change bias.
C)  commodity substitution bias.
D)  outlet substitution bias.
E)  new price bias.F) C) and E)
G) A) and B)

Question 13

When calculating the CPI, the Bureau of Labor Statistics

Accepted Answer

A)  weights the price of goods and services in the basket relative to the importance of the average urban household budget.
B)  sums the prices of the goods and services in the average urban household consumption basket.
C)  weights the price of all goods and services produced in a year within a country's borders.
D)  multiplies by 100 the average price of goods and services in the average urban consumer's basket.
E)  makes certain to weight the goods and services equally so that no one product is over-weighted.F) B) and C)
G) C) and D)

Question 14

$$\begin{array} { l c c } 
 { \text { GDP } } & \begin{array} { c } 
\text { Data for 2010 } \
\text { (billions of dollars) }
\end{array} & \begin{array} { c } 
\text { Data for 2010 } \
\text { (billions of dollars) }
\end{array} \
\hline \text { Nominal GDP } & 3,300 & 4,200 \
\text { Real GDP } & 3,300 & 3,600 \
\hline
\end{array}$$
-The table above has real and nominal GDP for two years for a foreign country.
a. What does the GDP price index equal in 2010?
 What does the value of the GDP price index tell you about 2010?
b. What does the GDP price index equal in 2011?

Accepted Answer

a. The GDP price index equals (100)× (no...

Question 15

What are the three stages of constructing the CPI?

Accepted Answer

The first stage is to select the CPI mar...

Question 16

Suppose the Bureau of Labor Statistics uses Ballpark Franks as the hot dogs used when calculating the consumer price index. During 2012, Oscar Mayer aggressively reduces prices. Consumers respond by purchasing more Oscar Mayer and less Ballpark Franks. The 2012 CPI is likely to

Accepted Answer

A)  overstate the average prices paid by consumers.
B)  overstate the average prices paid by businesses.
C)  understate the average prices paid by consumers.
D)  understate the average prices paid by businesses.
E)  neither understate nor overstate the average prices because some consumers will still buy Ballpark Franks.F) None of the above
G) A) and B)

Question 17

Define the nominal interest rate and the real interest rate. Discuss the relationship between the nominal interest rate and the real interest rate.

Accepted Answer

The nominal interest rate is the percent...

Question 18

If the CPI is 231.4 in one year and is 241.2 in the next year, then the inflation rate equals

Accepted Answer

A)  (241.2-231.4) × 100.
B)    (241.2−231.4) 231.4\frac { ( 241.2 - 231.4 )  } { 231.4 }231.4(241.2−231.4) ​  × 100.
C)    241.2−231.4241.2\frac { 241.2 - 231.4 } { 241.2 }241.2241.2−231.4​  × 100.
D)    231.4−241.2231.4\frac { 231.4 - 241.2 } { 231.4 }231.4231.4−241.2​  × 100.
E)    231.4−241.2241.2\frac { 231.4 - 241.2 } { 241.2 }241.2231.4−241.2​  × 100. F) B) and D)
G) D) and E)

Question 19

The CPI was 170 last year and is 190 this year. What is the inflation rate between these two years?

Accepted Answer

A)  10.5 percent
B)  20 percent
C)  11.8 percent
D)  18 percent
E)  15.0 percentF) A) and E)
G) B) and D)

Question 20

What is the commodity substitution bias?
 What effect does it have on the CPI?

Accepted Answer

The commodity substitution bias refers t...

Exam 16: The Cpi and the Cost of Living

Constructing the CPI involves which of the following stages? I. conducting the monthly price survey Ii. converting the CPI to an international index Iii. selecting CPI market basket

Correct Answer
verified

What is the commodity substitution bias? What effect does it have on the CPI?

Correct Answer
verified
The commodity substitution bias refers t...
View Answer

Correct Answer
verified
a. The GDP price index equals (100)× (no...
View Answer

The quality change bias is most likely to put into the CPI and so the inflation rate.

Correct Answer
verified

The price survey of the goods contained in the CPI market basket is conducted

Correct Answer
verified

Suppose the Bureau of Labor Statistics uses Ballpark Franks as the hot dogs used when calculating the consumer price index. During 2012, Oscar Mayer aggressively reduces prices. Consumers respond by purchasing more Oscar Mayer and less Ballpark Franks. The 2012 CPI is likely to

Correct Answer
verified

Suppose the base reference period is 1982-1984. If your nominal wage rate is $8.00 per hour when the CPI is 180, what is your real wage rate in 1982-1984 dollars?

Correct Answer
verified
The real wage rate equals 100 ...
View Answer

What are the three stages of constructing the CPI?

Correct Answer
verified
The first stage is to select the CPI mar...
View Answer

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2011. The inflation rate in Syldavia from 2011 to 2012 was

Correct Answer
verified

If you are earning $20,000 this year and the CPI is 165, your real income in base year prices is

Correct Answer
verified

Suppose the CPI in 1983 is 100 and the CPI this year is 172. These values for the CPI mean that

Correct Answer
verified

If the CPI is 231.4 in one year and is 241.2 in the next year, then the inflation rate equals

Correct Answer
verified

When calculating the CPI, the Bureau of Labor Statistics

Correct Answer
verified

The CPI was 170 last year and is 190 this year. What is the inflation rate between these two years?

Correct Answer
verified

When the nominal price of a good increases over time, must its real price also increase?

Correct Answer
verified
No, even though the nominal price of a g...
View Answer

Define the nominal interest rate and the real interest rate. Discuss the relationship between the nominal interest rate and the real interest rate.

Correct Answer
verified
The nominal interest rate is the percent...
View Answer

The formula for the CPI is

Correct Answer
verified

What, if any, is the impact of the CPI bias on government spending and taxes?

Correct Answer
verified
About one third of government outlays, s...
View Answer

An example of the commodity substitution bias in the calculation of the CPI is a price increase in

Correct Answer
verified

When the price of broccoli increase relative to cauliflower, people who buy fresh vegetables respond by buying more cauliflower and fewer broccoli. As a result, the CPI has a

Correct Answer
verified

Exam 16: The Cpi and the Cost of Living

Constructing the CPI involves which of the following stages? I. conducting the monthly price survey Ii. converting the CPI to an international index Iii. selecting CPI market basket

Correct AnswerverifiedShow Answer

What is the commodity substitution bias? What effect does it have on the CPI?

Correct AnswerverifiedThe commodity substitution bias refers t...View AnswerShow Answer

Correct Answerverifieda. The GDP price index equals (100)× (no...View AnswerShow Answer

The quality change bias is most likely to put ________ into the CPI and so ________ the inflation rate.

Correct AnswerverifiedShow Answer

The price survey of the goods contained in the CPI market basket is conducted

Correct AnswerverifiedShow Answer

Suppose the Bureau of Labor Statistics uses Ballpark Franks as the hot dogs used when calculating the consumer price index. During 2012, Oscar Mayer aggressively reduces prices. Consumers respond by purchasing more Oscar Mayer and less Ballpark Franks. The 2012 CPI is likely to

Correct AnswerverifiedShow Answer

Suppose the base reference period is 1982-1984. If your nominal wage rate is $8.00 per hour when the CPI is 180, what is your real wage rate in 1982-1984 dollars?

Correct AnswerverifiedThe real wage rate equals 100 ...View AnswerShow Answer

What are the three stages of constructing the CPI?

Correct AnswerverifiedThe first stage is to select the CPI mar...View AnswerShow Answer

-The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2011. The inflation rate in Syldavia from 2011 to 2012 was

Correct AnswerverifiedShow Answer

If you are earning $20,000 this year and the CPI is 165, your real income in base year prices is

Correct AnswerverifiedShow Answer

Suppose the CPI in 1983 is 100 and the CPI this year is 172. These values for the CPI mean that

Correct AnswerverifiedShow Answer

If the CPI is 231.4 in one year and is 241.2 in the next year, then the inflation rate equals

Correct AnswerverifiedShow Answer

When calculating the CPI, the Bureau of Labor Statistics

Correct AnswerverifiedShow Answer

The CPI was 170 last year and is 190 this year. What is the inflation rate between these two years?

Correct AnswerverifiedShow Answer

When the nominal price of a good increases over time, must its real price also increase?

Correct AnswerverifiedNo, even though the nominal price of a g...View AnswerShow Answer

Define the nominal interest rate and the real interest rate. Discuss the relationship between the nominal interest rate and the real interest rate.

Correct AnswerverifiedThe nominal interest rate is the percent...View AnswerShow Answer

The formula for the CPI is

Correct AnswerverifiedShow Answer

What, if any, is the impact of the CPI bias on government spending and taxes?

Correct AnswerverifiedAbout one third of government outlays, s...View AnswerShow Answer

An example of the commodity substitution bias in the calculation of the CPI is a price increase in

Correct AnswerverifiedShow Answer

When the price of broccoli increase relative to cauliflower, people who buy fresh vegetables respond by buying more cauliflower and fewer broccoli. As a result, the CPI has a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The commodity substitution bias refers t...
View Answer

Correct Answer
verified
a. The GDP price index equals (100)× (no...
View Answer

The quality change bias is most likely to put into the CPI and so the inflation rate.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The real wage rate equals 100 ...
View Answer

Correct Answer
verified
The first stage is to select the CPI mar...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
No, even though the nominal price of a g...
View Answer

Correct Answer
verified
The nominal interest rate is the percent...
View Answer

Correct Answer
verified

Correct Answer
verified
About one third of government outlays, s...
View Answer

Correct Answer
verified

Correct Answer
verified