Chapter 24 Practice Questions

A candy bar cost $0.60 in 2014. The value for the CPI in 1962 is 30.4 and the value of the CPI for 2014 is 236.2, what is the price of a candy bar in 1962 dollars?

$0.08

A candy bar cost $0.85 in 2014. The value for the CPI in 1962 is 30.4 and the value of the CPI for 2014 is 236.2, what is the price of a candy bar in 1962 dollars?

$0.11

A candy bar cost $1.00 in 2014. The value for the CPI in 1962 is 30.4 and the value of the CPI for 2014 is 236.2, what is the price of a candy bar in 1962 dollars?

$0.13

A soft drink cost $.85 in 2014. The value for the CPI in 1965 is 60.2 and the value of the CPI for 2014 is 236.2, what is the price of a soft drink in 1965 dollars?

$0.22

A soft drink cost $1.00 in 2014. The value for the CPI in 1965 is 60.2 and the value of the CPI for 2014 is 236.2, what is the price of a soft drink in 1965 dollars?

$0.25

A soft drink cost $1.75 in 2014. The value for the CPI in 1965 is 60.2 and the value of the CPI for 2014 is 236.2, what is the price of a soft drink in 1965 dollars?

$0.45

Suppose the consumer price index is 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014. If Social Security benefits were $1,000 in 2008 and we indexed them for inflation, the Social Security benefits would have been ________ in 2010.

$1,056.18

Suppose the consumer price index is 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014. If Social Security benefits were $1,000 in 2008 and we indexed them for inflation, the Social Security benefits would have been ________ in 2012.

$1,123.60

Suppose the consumer price index is 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014. If Social Security benefits were $1,000 in 2008 and we indexed them for inflation, the Social Security benefits would have been ________ in 2014.

$1,157.30

A candy bar cost $1.00 in 2014. Given the value for the CPI in 1962 and the value of the CPI for 2014, which of the following is correct to find the price of a candy bar in 1962 dollars?

$1.00 x (CPI1962/CPI2014 )

The price of a soft drink from a vending machine in 2014 is $1.25. Given the value for the CPI in 1955 and the value of the CPI for 2014, which of the following is correct to find the price of a soft drink in 1955 dollars?

$1.25 x (CPI1955/CPI2014)

The price of a soft drink from a vending machine in 2014 is $1.25. Given the value for the CPI in 1965 and the value of the CPI for 2014, which of the following is correct to find the price of a soft drink in 1965 dollars?

$1.25 x (CPI1965/CPI2014)

Jenny earned a salary of $52,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is

$55,702

Jenny earned a salary of $54,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is

$57,845

Jenny earned a salary of $56,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is

$59,987

Jenny earned a salary of $58,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is

$62,130

Suppose the consumer price index is 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014. If Social Security Benefits were $1,000 in 2014 and we index them for inflation, the Social Security benefits would have been ________ in 2008.

$864.08

Suppose the consumer price index is 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014. If Social Security Benefits were $1,000 in 2014 and we index them for inflation, the Social Security benefits would have been ________ in 2010.

$912.62

Suppose the consumer price index is 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014. If Social Security Benefits were $1,000 in 2014 and we indexed for inflation, the Social Security benefits would have been ________ in 2012.

$970.87

If the nominal interest rate is 2 percent and the real interest rate is 4 percent, then the inflation rate is

-2 percent

If the nominal interest rate is 4 percent and the inflation rate is 6 percent, then the real interest rate is

-2 percent

If the nominal interest rate is 2 percent and the inflation rate is 1 percent, then the real interest rate is

1 percent.

If the nominal interest rate is 5 percent and the real interest rate is 3 percent, then the inflation rate is

2 percent

If the consumer price index was 100 in 2008, 102 in 2010, 105 in 2012, in 107 in 2014, then the base year must be

2008

If the consumer price index was 97 in 2008, 100 in 2010, 101 in 2012, and 104 in 2014, then the base year must be

2010

If the nominal interest rate is 10 percent and the inflation rate is 4 percent, then the real interest rate is

6 percent

The ______ is responsible for calculating and reporting the CPI.

Bureau of Labor Statistics

The _______ is the most commonly reported measure of inflation by the media.

CPI

Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 2% from 2013 to 2014?

CPI in 2013 = 110; CPI in 2014 = 112.2

Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 5% from 2013 to 2014?

CPI in 2013 = 90; CPI in 2014 = 94.5

Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 10% from 2013 to 2014?

CPI in 2013 = 90; CPI in 2014 = 99

The best measure for changes in the price level of a consumer basket of goods and services over time is the

CPI since it measures changes in the prices of a basket of goods and services consumed by a typical consumer over time.

A measure of the overall cost of a basket of goods and services purchased by a typical consumer is the

Consumer Price Index (CPI).

Inflation can only be measured by the consumer price index and not by the GDP deflator

False

Jenny earned a salary of $55,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is $56,012.

False

The consumer price index is a perfect measure of inflation in our economy.

False

The consumer price index is the only measure of inflation used in the United Sates.

False

A general increase in the price level of goods and services in an economy describes

Inflation

The Bureau of Labor Statistics reports the CPI

Monthly

Which of the following statements is correct regarding the CPI and the GDP deflator?

The CPI is better than the GDP deflator at reflecting the prices of goods and services bought by consumers.

The GDP deflator is the most commonly reported indicator for inflation because:

The GDP deflator is not more commonly reported than the CPI.

The difference between the nominal interest rate and the inflation rate is equal to the real interest rate.

True

The difference between the nominal interest rate and the real interest rate is equal to the inflation rate.

True

Coffee is weighted more than tea in the calculation of the CPI if

consumers buy more coffee than tea.

The CPI is able to measure changes in the quality of goods over time

imprecisely because it is relatively complicated to measure quality changes.

Substitution bias is a problem when measuring the consumer price index because

prices of goods and services do not change in the same proportion from year to year.

The most commonly reported measure of inflation by the media is

the CPI

The introduction of new goods creates a problem when measuring the CPI because

the CPI is based on a fixed basket of goods and services and does not reflect increased value as a result of a larger variety of goods.

If the consumer price index was 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014, then the base year must be

2012

If the nominal interest rate is 2 percent and the real interest rate is -1 percent, then the inflation rate is

3 percent

Which of the following statements is correct for explaining why the CPI is commonly used as a measure of inflation?

the CPI better reflects the prices of goods and services bought by consumers.

Jenny earned a salary of $48,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is

$51,418

Jenny earned a salary of $50,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is

$53,560

Jenny earned a salary of $55,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars is $58,916.

True

The Bureau of Labor Statistics calculates the CPI.

True

The CPI value in 2013 is 100 and the annual inflation rate is 6%. The CPI value in 2014 is 106.

True