Macro Econ Chapter 6

1. If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as a. $25.00 purchased in 1975. c. $33.33 purchased in 1975. b. $40.00 purchased in 1975. d. $135.55 purchased in 1975.

B

1. If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was a. 1.06 percent. b. 6 percent. c. 10.6 percent. d. 106 percent.

B

Which of the following is not correct? a. The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. b. The consumer price index is used to monitor changes in the cost of living over time. c. The consumer price index is used by economists to measure the inflation rate. d. The consumer price index is used to measure the quantity of goods and services that the economy is producing.

D

1. 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 a. 5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years. b. 7.5 percent deflation between the first and second years, and 4.3 percent deflation between the second and third years. c. 5.3 percent inflation between the first and second years, and 4.1 percent inflation between the second and third years. d. 7.5 percent inflation between the first and second years, and 4.3 percent inflation between the second and third years.

A

When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d. can offset the effects of rising prices by saving more.

A

Economists use the term inflation to describe a situation in which a. some prices are rising faster than others. b. the economy's overall price level is rising. c. the economy's overall price level is high, but not necessarily rising. d. the economy's overall output of goods and services is rising faster than the economy's overall price level.

B

1. 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 a. $5,296. b. $1,128,421 c. $1,208,421 d. $17,152,000

C