Inflation

To determine your real wage, you should divide your nominal wage by the:

CPI

An economic indicator used to measure the average price of a market basket of goods and services over time is the:

Consumer Price Index.

In the United States, the _____ and the ____ tend to move together and in the same direction.

GDP and Consumer Price Indexes

Vegetables are purchased by a restaurant. Which major group of the CPI does this purchase belong to?

It is not included in any CPI category

_____ income is the number of dollars you receive for your labor.

Nominal

The price of a good is a measure of how much money it takes to buy that good.

True

The CPI is computed by the

U.S. Bureau of Labor Statistics

When you sell a stock, you must pay taxes on the gain in value. Why?

You must pay this tax based on the nominal change in value.

The producer price index measures the ___ change in the selling prices received by the producers of goods and services.

average

The Consumer Price Index (CPI) is constructed using the goods and services purchased by the _____

average household

Inflation is caused by increases in aggregate ____

demand

The consumption category that accounts for the largest proportion of consumer spending is ____

housing

When comparing periods of time separated by decades or generations:

income comparisons are not exact because of the different goods and services that can be purchased in different eras.

In general, an increase in the money supply causes:

inflation

The U.S. Bureau of Labor Statistics uses the Consumer Price Index to track ____ over time

inflation

The actual number of dollars received in exchange for the different resources available in the economy is:

nominal income

The amount of goods and services that can be purchased with actual income is:

real income

If the CPI and the inflation rate calculated overstate the true level of inflation in the economy, then the purchasing power of retirees is:

rising over time and retirees are becoming better off.

Any salary that is rising slower than the rate of inflation is actually falling, in real terms. This statement refers to

the difference between real and nominal income.

A percentage change in a value equals the:

value in the later year minus the value in the earlier year divided by the value in the earlier year and multiplied by 100.