Macro Ch. 11

The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. Refer to Scenario 24-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost

$0.27, so tennis balls were cheaper in 1975

The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. Refer to Scenario 24-1. The price of a 1975 tennis ball in 2005 dollars is

$0.37.

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

$1,208,421

The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. Year Price of a Baseball Price of a Baseball Bat 2008 $3.25 $75 2009 $3.75 $82 2010 $4.50 $96 Refer to Table 24-10. How much was the cost of the basket in 2008?

$169.50

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about

$2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

$23.86 purchased in 1965.

Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. Refer to Scenario 24-4. The Wrexington salary in Charlieville dollars is

$30,000.00

Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. Refer to Scenario 24-4. The Wrexington salary in Charlieville dollars is

$30,000.00.

n 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, the hospital cost about

$4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. Refer to Scenario 24-4. The Charlieville salary in Wrexington dollars is

$66,666.67.

The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer's basket consists of 6 baseballs and 2 baseball bats. Year Price of a Baseball Price of a Baseball Bat 2008 $3.25 $75 2009 $3.75 $82 2010 $4.50 $96 Refer to Table 24-10. If 2008 is the base year, then the consumer price index was

100.00 in 2008, 110.03 in 2009, and 129.20 in 2010.

The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. Month Price of Gas Price of Milk April $2.00 $3.50 May $3.50 $3.25 June $3.85 $3.58 Refer to Table 24-9. What is the consumer price index for May?

166

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced

5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years.

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

5.9 percent between the first and second years, and 8.3 percent between the second and third years.

The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. Month Price of Gas Price of Milk April $2.00 $3.50 May $3.50 $3.25 June $3.85 $3.58 Refer to Table 24-9. What is the inflation rate for May?

66.4%

If 2012 is the base year, then the inflation rate for 2012 equals

CPI in 2013 - CPI in 2012 /CPI in 2012 x 100

If 2010 is the base year, then the inflation rate in 2015 equals

CPI in 2015 - CPI in 2014 / CPI in 2014 x100

Which of the following statements is true?

If we know the base year is 2000, and if we know the value of the consumer price index for the year 1995, then we have all the information we need to calculate the percentage change in the cost of living between 1995 and 2000.

The price index was 150 in the first year, 160 in the second year, and 165 in the third year. Which of the following statements is correct?

The price level was higher in the second year than in the first year, and it was higher in the third year than in the second year. The inflation rate was positive between the first and second years, and it was positive between the second and third years. The inflation rate was lower between the second and third years than it was between the first and second years. Correct Answer: All of the above are correct

Changes in the quality of a good

can lead to either an increase or a decrease in the value of a dollar.

When the consumer price index falls, the typical family

can spend fewer dollars to maintain the same standard of living.

When the consumer price index rises, the typical family

has to spend more dollars to maintain the same standard of living.

The nominal interest rate tells you

how fast the number of dollars in your bank account rises over tim

The real interest rate tells you

how fast the purchasing power of your bank account rises over time

The real interest rate tells you

how fast the purchasing power of your bank account rises over time.

In the CPI, goods and services are weighted according to

how much consumers buy of each good or service.

The consumer price index is used to

monitor changes in the cost of living over time.

The CPI is calculated

monthly by the Bureau of Labor Statistics.

The economy's inflation rate is the

percentage change in the price level from the previous period

The economy's inflation rate is the

percentage change in the price level from the previous period.

The inflation rate is defined as the

percentage change in the price level from the previous period.

Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should

take the Charlieville job

If the CPI was 110 this year and 100 last year, the

the cost of the CPI basket of goods and services increased by 10 percent this year.

If the CPI was 125 this year and 120 last year, then

the cost of the CPI basket of goods and services increased by 4.2 percent this year. the price level increased by 4.2 percent this year. the inflation rate for this year was 4.2 percent. Correct Answer: All of the above are correct.

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent

The CPI is a measure of the overall cost of

the goods and services purchased by a typical consumer.

The consumer price index is used to

turn dollar figures into meaningful measures of purchasing power.