Chapter 24 Minipractice

Consternation Corporation has an agreement with its workers to index completely the wage of its employees using the CPI. Consternation Corporation currently pays its production line workers $8.00 an hour and is scheduled to index their wages today. If the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly wages of its workers by

a. $0.25. b. $2.56. c. $1.60. d. $2.00.

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

a. $20.00 purchased in 1955. b. $95.00 purchased in 1955. c. $500 purchased in 1955. d. $4.75 purchased in 1955.

Nate collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then his Social Security payments for 1986 should have been

a. $257. b. $228. c. $264. d. $238.

In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

a. $8,100.71 b. $18,360.66 c. $22,400.00 d. $3,485.71

If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent, then the inflation rate is

a. -1.5 percent. b. 6.5 percent. c. -6.5 percent. d. 1.5 percent.

Table 24-7. The table below applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. Refer to Table 24-7. If the base year is 2009, then the economy's inflation rate is

a. 10 percent in 2010 and 6.36 percent in 2011. b. 9.2 percent in 2010 and 6 percent in 2011. c. 10 percent in 2010 and 17 percent in 2011. d. 8.22 percent in 2010 and 5 percent in 2011.

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. Refer to Table 24-10. The inflation rate was

a. 10.03 percent in 2009 and 17.43 percent in 2010. b. 17.00 percent in 2009 and 29.20 percent in 2010. c. 17.00 percent in 2009 and 32.50 percent in 2010. d. 10.03 percent in 2009 and 29.20 percent in 2010.

The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. Refer to Table 24-6. If the base year is 2010, then the economy's inflation rate in 2010 was

a. 10.5 percent. b. 20.0 percent. c. 15.0 percent. d. 25.00 percent.

Table 24-7. The table below applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. Refer to Table 24-7. If the base year is 2010, then the consumer price index is

a. 100 in 2009, 109 in 2010, and 115 in 2011. b. 90.91 in 2009, 100 in 2010, and 106.36 in 2011. c. 95.90 in 2009, 100 in 2010, and 107.44 in 2011. d. 88.82 in 2009, 100 in 2010, and 107.44 in 2011

Table 24-6The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. Refer to Table 24-6. If the base year is 2009, then the economy's inflation rate in 2010 is

a. 120 percent. b. 20 percent. c. 25 percent. d. 30 percent.

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

a. 13.5 percent. b. 0.45 percent. c. 2.5 percent. d. -2.5 percent.

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. Refer to Table 24-10. The inflation rate was

a. 17.00 percent in 2009 and 29.20 percent in 2010. b. 10.03 percent in 2009 and 29.20 percent in 2010. c. 17.00 percent in 2009 and 32.50 percent in 2010. d. 10.03 percent in 2009 and 17.43 percent in 2010.

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

a. 2 percent. b. 12 percent. c. -2 percent. d. 0.4 percent.

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

a. 20.0% b. 9.1% c. 16.7% d. 45.5%

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be

a. 2012. b. 2013. c. 2014. d. The base year cannot be determined from the given information.

The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. Refer to Table 24-6. If the base year is 2010, then the economy's inflation rate in 2010 was

a. 25.00 percent. b. 20.0 percent. c. 10.5 percent. d. 15.0 percent.

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

a. 5 percent. b. 11 percent. c. -5 percent. d. 1.67 percent.

Table 24-6The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs. Refer to Table 24-6. If the base year is 2011, then the consumer price index was

a. 86.2 in 2009, 96.7 in 2010, and 100.0 in 2011. b. 124.1 in 2009, 103.4 in 2010, and 100.0 in 2011. c. 125.0 in 2009, 150.0 in 2010, and 145.0 in 2011. d. 86.2 in 2009, 103.4 in 2010, and 100.0 in 2011.

Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 10 percent for 2014?

a. CPI in 2014 = 102; CPI in 2015 = 112 b. CPI in 2013 = 210; CPI in 2014 = 231 c. CPI in 2014 = 90; CPI in 2015 = 100 d. CPI in 2013 = 210; CPI in 2014 = 220

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

a. Sophia will have 3 percent more money, which will purchase 5 percent more goods. b. Sophia will have 5 percent more money, which will purchase 7 percent more goods. c. Sophia will have 5 percent more money, which will purchase 3 percent more goods. d. Sophia will have 3 percent more money, which will purchase 7 percent more goods.

The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. Refer to Table 24-5. If the base year is 2006, then the CPI

a. decreased from 2004 to 2005 and decreased from 2005 to 2006. b. increased from 2004 to 2005 and increased from 2005 to 2006. c. decreased from 2004 to 2005 and increased from 2005 to 2006. d. increased from 2004 to 2005 and decreased from 2005 to 2006.

In the United States in the late 1970s, nominal interest rates were high and inflation rates were very high. As a result, real interest rates were

a. high. b. low, and in some years they were negative. c. low, but never negative. d. very high.

Table 24-11. Megan's salary for three consecutive years, along with other values, is presented in the table below. Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. Then Megan's 2013 salary represents more purchasing power than her 2011 salary as long as the consumer price index for 2013 is

a. less than 264.25. b. greater than 258.71. c. greater than 264.25. d. less than 258.71.

You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in 1962 prices?

a. sixty cents (1962 CPI - today's CPI) b. sixty cents (today's CPI / 1962 CPI) c. sixty cents (today's CPI - 1962 CPI) d. sixty cents (1962 CPI / today's CPI)

As long as prices are rising over time, then

a. the real interest rate exceeds the nominal interest rate. b. the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time. c. the nominal interest rate exceeds the real interest rate. d. the real interest rate is positive.