Question 1

Which of the following is correct?

Accepted Answer

A)   The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers.
B)   The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.
C)   The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers.
D)   The GDP deflator is more commonly used as a gauge of inflation than the CPI is.E) A) and B)
F) B) and C)

Question 2

Scenario 16-2
The price tag on a golf ball in 1975 read $0.20,and the price tag on a golf ball in 2005 read $2.00.The CPI in 1975 was 52.3,and the CPI in 2005 was 191.3.
-Refer to Scenario 16-2.The price of a 1975 golf ball in 2005 dollars is

Accepted Answer

A)   $0.05.
B)   $0.53.
C)   $0.73.
D)   $2.00.E) A) and C)
F) A) and D)

Question 3

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Accepted Answer

A)   The consumer price index and the GDP deflator will both fall.
B)   The consumer price index and the GDP deflator will both be unaffected.
C)   The consumer price index will fall,and the GDP deflator will be unaffected.
D)   The consumer price index will be unaffected,and the GDP deflator will fall.E) A) and B)
F) B) and C)

Question 4

Ms.Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent.During that year,the price level went up by 15 percent.Which of the following statements is correct?

Accepted Answer

A)   Ms.Lane will repay the bank fewer dollars than she initially borrowed.
B)   Ms.Lane's repayment will give the bank less purchasing power than it originally loaned her.
C)   Ms.Lane's repayment will give the bank greater purchasing power than it originally loaned her.
D)   Ms.Lane's repayment will give the bank the same purchasing power that it originally loaned her.E) A) and D)
F) B) and C)

Question 5

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Accepted Answer

A)   substitution bias
B)   introduction of new goods
C)   unmeasured quality change
D)   income biasE) C) and D)
F) B) and C)

Question 6

When the price of nuclear missiles rises,this change is reflected in the CPI but not in the GDP deflator.

Accepted Answer

A) True 
 B)False

Question 7

Scenario 16-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year.Her son,Josh Holloway,is an accountant today and he earned $210,000 in 2008.The price index was 17.6 in 1944 and 184 in 2008.
-Refer to Scenario 16-3.In real terms,Sue Holloway's income amounts to about what percentage of Josh Holloway's income?

Accepted Answer

A)   5.71 percent
B)   9.6 percent
C)   59.7 percent
D)   67.4 percentE) B) and C)
F) None of the above

Question 8

In calculating the CPI,a fixed basket of goods and services is used.The quantities of the goods and services in the fixed basket are determined by

Accepted Answer

A)   surveying consumers.
B)   surveying sellers of the goods and services.
C)   working backward from the rate of inflation to arrive at imputed values for those quantities.
D)   arbitrary choices made by federal government employees.E) A) and B)
F) All of the above

Question 9

The GDP Deflator reflects

Accepted Answer

A)   the prices of all final goods and services currently produced domestically,as does the CPI.
B)   the price of a fixed basket of goods and services purchased by a typical consumer,as does the CPI.
C)   the prices of all final goods and services currently produced domestically,while the CPI reflects the price of a fixed basket of goods and services purchased by a typical consumer.
D)   the price of a fixed basket of goods and services purchased by a typical consumer,while the CPI reflects the prices of all final goods and services produced domestically.E) B) and D)
F) None of the above

Question 10

If the nominal interest rates rises,then the inflation rate must have increased.

Accepted Answer

A) True 
 B)False

Question 11

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.

Accepted Answer

A) True 
 B)False

Question 12

Table 16-1
The table below pertains to Pieway,an economy in which the typical consumer's basket consists of 10 bushels of peaches and 15 bushels of pecans.
 
-Refer to Table 16-1.The cost of the basket in 2006 was

Accepted Answer

A)   $200.
B)   $210.
C)   $240.
D)   $245.E) B) and D)
F) None of the above

Question 13

The value of the consumer price index increased from 140 to 147 during 2006.Nathan opened a bank account at the beginning of 2006,and at the end of 2006 his account balance was $12,840.The purchasing power of Nathan's account increased by 2 percent during the year.We can conclude that Nathan opened his account with a deposit of $11,500 at the beginning of 2006.

Accepted Answer

A) True 
 B)False

Exam 16: Measuring the Cost of Living

If the nominal interest rates rises,then the inflation rate must have increased.

Correct Answer
verified

When the price of nuclear missiles rises,this change is reflected in the CPI but not in the GDP deflator.

Correct Answer
verified

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.

Correct Answer
verified

Correct Answer
verified

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Correct Answer
verified

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Scenario 16-2 The price tag on a golf ball in 1975 read $0.20,and the price tag on a golf ball in 2005 read $2.00.The CPI in 1975 was 52.3,and the CPI in 2005 was 191.3. -Refer to Scenario 16-2.The price of a 1975 golf ball in 2005 dollars is

Correct Answer
verified

In calculating the CPI,a fixed basket of goods and services is used.The quantities of the goods and services in the fixed basket are determined by

Correct Answer
verified

The GDP Deflator reflects

Correct Answer
verified

Correct Answer
verified

Ms.Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent.During that year,the price level went up by 15 percent.Which of the following statements is correct?

Correct Answer
verified

Table 16-1 The table below pertains to Pieway,an economy in which the typical consumer's basket consists of 10 bushels of peaches and 15 bushels of pecans. -Refer to Table 16-1.The cost of the basket in 2006 was

Correct Answer
verified

Exam 16: Measuring the Cost of Living

If the nominal interest rates rises,then the inflation rate must have increased.

Correct AnswerverifiedShow Answer

When the price of nuclear missiles rises,this change is reflected in the CPI but not in the GDP deflator.

Correct AnswerverifiedShow Answer

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that U.S.mining companies purchase German-made ore trucks at a reduced price.By itself,what effect will this purchase have on the GDP deflator and on the consumer price index?

Correct AnswerverifiedShow Answer

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Scenario 16-2 The price tag on a golf ball in 1975 read $0.20,and the price tag on a golf ball in 2005 read $2.00.The CPI in 1975 was 52.3,and the CPI in 2005 was 191.3. -Refer to Scenario 16-2.The price of a 1975 golf ball in 2005 dollars is

Correct AnswerverifiedShow Answer

In calculating the CPI,a fixed basket of goods and services is used.The quantities of the goods and services in the fixed basket are determined by

Correct AnswerverifiedShow Answer

The GDP Deflator reflects

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ms.Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent.During that year,the price level went up by 15 percent.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Table 16-1 The table below pertains to Pieway,an economy in which the typical consumer's basket consists of 10 bushels of peaches and 15 bushels of pecans. -Refer to Table 16-1.The cost of the basket in 2006 was

Correct AnswerverifiedShow Answer

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