Econ Test 3 (ch. 11)

Refer to Table 11-2. Suppose the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the consumer price index for 2006 if the base year is 2005? a. 73.47 b. 109.22 c. 136.11 d. 150.00

C

If the nominal interest rate is 6 percent and the rate of inflation is 9 percent, then the real interest rate is a. 15 percent. b. 3 percent. c. -3 percent. d. -15 percent.

C

Refer to Table 11-3. Using 2002 as the base year, what was the inflation rate between 2002 and 2003? a. -8.89 percent b. -7.14 percent c. 3.75 percent d. 11.25 percent

A

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as a. $20.00 purchased in 1955. b. $33.33 purchased in 1955. c. $47.50 purchased in 1955. d. None of the above is correct.

A

The price index was 92 in 2005 and, between 2005 and 2006, the inflation rate was 13 percent. The price index in 2006 was a. 103.96. b. 105.00. c. 113.00. d. None of the above is correct.

A

Suppose today's CPI is 134.85, and today one must spend $580 to purchase the same basket of goods and services that could be bought for $400 in 1989. Then the CPI in 1989 was a. 68.97. b. 89.00. c. 93.00. d. 101.85.

C

From 2004 to 2005, the CPI for medical care increased from 260.8 to 272.8. What was the inflation rate for medical care? a. 12 percent b. 11.1 percent c. 4.9 percent d. 4.6 percent

D

. In a particular economy, the price index was 270 in 2005 and it was 300 in 2006. Which of the following statements is correct? a. The economy experienced a rising price level between 2005 and 2006. b. The economy experienced a higher inflation rate between 2005 and 2006 than it had experienced between 2004 and 2005. c. The inflation rate between 2005 and 2006 was 30 percent. d. All of the above are correct.

A

The price index in the first year is 150; in the second year it is 160; and in the third year it is 165. Which of the following statements is correct? a. 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. b. The inflation rate was positive between the first and second years, and it was positive between the second and third years. c. The inflation rate was lower between the second and third years than it was between the first and second years. d. All of the above are correct.

D

The price index was 128.96 in 2006 and, between 2005 and 2006, the inflation rate was 24 percent. The price index in 2005 was a. 30.95. b. 104.00. c. 104.96. d. 106.67.

B

Assume the consumer price index was 225 in 2006 and 234 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period? a. 2.5 percent b. 4.0 percent c. 7.5 percent d. 10.5 percent

A

Grant Smith was a doctor in 1944 and earned $12,000 that year. His daughter, Lisa Smith, is a doctor today and she earned $210,000 in 2005. The price index in 1944 was 17.6 and the price index in 2005 was 184. Lisa Smith's 2005 income in 1944 dollars is about a. $20,087. b. $24,667. c. $31,022. d. $36,556.

A

If the real interest rate relevant to a bank account is 5 percent and the expected inflation rate is 4 percent, then after a year a person expects to have, relative to today, a. 9 percent more dollars in the bank account, which will purchase 5 percent more goods. b. 5 percent more dollars in the bank account, which will purchase 4 percent more goods. c. 5 percent more dollars in the bank account, which will purchase 4 percent more goods. d. 4 percent more dollars in the bank account, which will purchase 1 percent more goods.

A

In 1964 in Riverside, California, one could buy a chili-dog and a root beer for $1.25. Today the same chili dog and root beer cost $2.95. Which pair of CPIs would imply that the cost in today's dollars was the same for both meals? a. 60 in 1964 and 141.6 today b. 75 in 1964 and 126.4 today c. 80 in 1964 and 112 today d. None of the above is correct.

A

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007? a. $2.50 b. $2.80 c. $3.20 d. $3.45

A

In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the inflation rate in 2007 was 16 percent, then how much did a magazine cost in 2007? a. $2.08 b. $2.32 c. $2.50 d. $2.64

A

Ingrid took a university teaching job as an assistant professor in 1974 at a salary of $10,000. By 2003, she had been promoted to full professor, with a salary of $50,000. If the price index in 1974 was 50 and the price index in 2003 was 180, what is Ingrid's 2003 salary in 1974 dollars? a. $13,889 b. $18,000 c. $26,000 d. $36,000

A

Leslie is offered a job in Seattle that pays $50,000. She is also offered a job in Boston that pays $60,000. Which set of CPIs below would make the two salaries have almost the same purchasing power? a. 83.3 in Seattle and 100 in Boston b. 89.3 in Seattle and 100 in Boston c. 100 in Seattle and 124.5 in Boston d. 100 in Seattle and 140 in Boston

A

Refer to Table 11-1. Suppose the typical consumer basket consists of 10 bushels of peaches and 15 bushels of pecans. Using 2005 as the base year, what was the inflation rate in 2006? a. 20 percent b. 16.7 percent c. 10 percent d. 8 percent

A

Refer to Table 11-3. Using 2002 as the base year, what was the inflation rate between 2004 and 2005? a. 40.00 percent b. 40.25 percent c. 46.46 percent d. 48.56 percent

A

Refer to Table 11-4. Using 2006 as the base year, the consumer price index is a. 100 in 2006, 135 in 2007, and 155 in 2008. b. 100 in 2006, 270 in 2007, and 310 in 2008. c. 200 in 2006, 270 in 2007, and 310 in 2008. d. 200 in 2006, 540 in 2007, and 620 in 2008.

A

Suppose the price index in 2004 was 110; in 2005 it was 120; and in 2006 it was 125. Which of the following statements is correct? a. The economy experienced inflation between 2004 and 2005, and again between 2005 and 2006. b. The inflation rate was positive between 2004 and 2005, and it was negative between 2005 and 2006. c. The inflation rate was higher between 2005 and 2006 than it was between 2004 and 2005. d. All of the above are correct.

A

Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of coffee rises from $2 to $2.50. If the CPI rises from 150 to 200, then people likely will buy a. more ice cream and more coffee. b. more ice cream and less coffee. c. less ice cream and more coffee. d. less ice cream and less coffee.

A

The price index in the first year is 110, in the second year is 100, and in the third year is 96. The economy experienced a. 9.1 percent deflation between the first and second years, and 4 percent deflation between the second and third years. b. 9.1 percent deflation between the first and second years, and 9.6 percent deflation between the second and third years. c. 10 percent deflation between the first and second years, and 4 percent deflation between the second and third years. d. 10 percent deflation between the first and second years, and 8.7 percent deflation between the second and third years.

A

Which of these changes in the price index produces the greatest rate of inflation: 106 to 112, 112 to 118, or 118 to 124? a. 106 to 112 b. 112 to 118 c. 118 to 124 d. All three changes show the same rate of inflation.

A

Which of these changes in the price index produces the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170? a. 80 to 100 b. 100 to 120 c. 150 to 170 d. All of these changes show the same rate of inflation.

A

Andrew is offered a job in Little Rock, where the CPI is 80, and a job in New York, where the CPI is 125. Andrew's job offer in Little Rock is for $42,000. How much does the New York job have to pay in order for the two salaries to represent about the same purchasing power? a. $74,667 b. $65,625 c. $60,900 d. $52,500

B

Assume an economy experienced a higher inflation rate, as measured by the CPI, between 2004 and 2005 than it experienced between 2003 and 2004. Which of the following scenarios is consistent with this assumption? a. The CPI was 100 in 2003, 110 in 2004, and 120 in 2005. b. The CPI was 100 in 2003, 110 in 2004, and 124 in 2005. c. The CPI was 110 in 2003, 150 in 2004, and 200 in 2005. d. All of the above are correct.

B

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption? a. The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. b. The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. c. The CPI was 110 in 2003, 106 in 2004, and 100 in 2005. d. All of the above are correct.

B

If this year the CPI is 110 and last year it was 100, then a. the cost of the CPI basket of goods and services has increased this year by 110 percent. b. the price level as measured by the CPI has increased by 10 percent. c. the inflation rate for this year has increased by 10 percent over last year's inflation rate. d. All of the above are correct.

B

In 1972 in Riverside, Iowa one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost about $6.00, which pair of CPIs would make the cost in today's dollars the same for both years? a. 60 in 1972 and 150 today b. 65 in 1972 and 156 today c. 90 in 1972 and 145.8 today d. None of the above is correct.

B

Ms. Smith borrowed $1,000 from her bank for one year at an interest rate of 10 percent. During that year the price level went up by 15 percent. Which of the following statements is correct? a. Ms. Smith will repay the bank fewer dollars than she initially borrowed. b. Ms. Smith's repayment will give the bank less purchasing power than it originally loaned her. c. Ms. Smith's repayment will give the bank greater purchasing power than it originally loaned her. d. Ms. Smith's repayment will give the bank the same purchasing power that it originally loaned her.

B

Refer to Table 11-1. Suppose the typical consumer basket consists of 10 bushels of peaches and 15 bushels of pecans. Using 2005 as the base year, the CPI for 2006 is a. 100. b. 120. c. 200. d. 240.

B

Refer to Table 11-3. Using 2002 as the base year, what was the inflation rate between 2003 and 2004? a. 28.5 percent b. 34.2 percent c. 47 percent d. It is impossible to determine without knowing the base year.

B

Refer to Table 11-4. Using 2006 as the base year, the inflation rate is a. 13.3 percent for 2007 and 14.8 percent for 2008. b. 35 percent for 2007 and 14.8 percent for 2008. c. 35 percent for 2007 and 55 percent for 2008. d. 135 percent for 2007 and 155 percent for 2008.

B

Refer to Table 11-4. Using 2007 as the base year, the consumer price index is a. 78.22 in 2006, 100 in 2007, and 121.10 in 2008. b. 74.07 in 2006, 100 in 2007, and 114.81 in 2008. c. 100 in 2006, 135 in 2007, and 155 in 2008. d. 200 in 2006, 270 in 2007, and 310 in 2008.

B

Refer to Table 11-4. Using 2008 as the base year, the consumer price index is a. 52.66 in 2006, 84.25 in 2007, and 106.5 in 2008. b. 64.52 in 2006, 87.10 in 2007, and 100 in 2008. c. 52.66 in 2006, 90.89 in 2007, and 100 in 2008. d. 100 in 2006, 135 in 2007, and 155 in 2008.

B

Renee earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 for 2001 and 221.25 for 2006. Renee's 2006 salary in 2001 dollars is a. $45,198; thus, Renee's purchasing power decreased between 2001 and 2006. b. $64,000; thus, Renee's purchasing power increased between 2001 and 2006. c. $64,000; thus, Renee's purchasing power decreased between 2001 and 2006. d. $75,000; thus, Renee's purchasing power increased between 2001 and 2006.

B

Suppose the CPI was 104 in 1967, and suppose currently the CPI is 390. According to the CPI, $10 in 1967 purchased the same number of goods and services as a. $28.88 purchases today. b. $37.50 purchases today. c. $42.64 purchases today. d. $104.00 purchases today.

B

The 2005 CPI was 196 and the 1982 CPI was 96.5. If your parents put aside $1,000 for you in 1982, how much would you have needed in 2005 in order to buy what you could have bought with the $1,000 in 1982? a. $1,834.20 b. $2,031.09 c. $2,308.89 d. None of the above is correct.

B

The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts and 2 pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia's inflation rate in 2006? a. 30 percent b. 24.4 percent c. 21.6 percent d. It is impossible to determine without knowing the base year.

B

The price index in 2006 is 120, and in 2007 it is 127.2. What is the inflation rate? a. 5.4 percent b. 6.0 percent c. 7.2 percent d. The inflation rate is impossible to determine without knowing the base year.

B

Tiffany is offered a Job in Minneapolis that pays $80,000. She is offered a similar job in Memphis that pays $64,000. Which set of CPIs would make the two salaries have almost the same purchasing power? a. 90 in Minneapolis and 80 in Memphis b. 90 in Minneapolis and 72 in Memphis c. 90 in Minneapolis and 66 in Memphis d. None of the above is correct.

B

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. Ruth's 1931 salary was equivalent to a 2005 salary of about a. $536,000. b. $828,000. c. $1,026,000. d. $1,216,000.

C

Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the price index was 38.8 in 1970 and was 180 in 2006, what is the price of a 1970 bag of groceries in 2006 prices? a. $25.00 b. $29.11 c. $37.11 d. $43.22

C

Grant Smith was a doctor in 1944 and earned $12,000 that year. His daughter, Lisa Smith, is a doctor today and she earned $210,000 in 2005. The price index in 1944 was 17.6 and the price index in 2005 was 184. In real terms, Lisa Smith's income amounts to about what percentage of Grant Smith's income? a. 96 percent b. 133 percent c. 167 percent d. 206 percent

C

If the consumer price index was 100 in the base year and 107 in the following year, the inflation rate was a. 107 percent. b. 10.7 percent. c. 7 percent. d. 1.07 percent.

C

If the nominal interest rate is 8 percent and rate of inflation is 5.5 percent, then the real interest rate is a. 13.5 percent. b. 12 percent. c. 2.5 percent. d. -2.5 percent.

C

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is a. 11 percent. b. 24 percent. c. 5 percent. d. 3.75 percent.

C

In 1970 Professor Fellswoop earned $12,000; in 1980 he earned $24,000; and in 1990 he earned $36,000. If the CPI was 40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Fellswoop's salary was highest in a. 1970, and lowest in 1980. b. 1990, and lowest in 1980. c. 1980, and lowest in 1970. d. 1990, and lowest in 1970.

C

In 1972 in Sioux Falls, South Dakota, one could buy model rocket engines for $1.50 each. If those same engines cost $2.50 each today, which of the following pair of CPIs would make the engine prices in today's dollars the same for both years? a. 60 in 1972 and 95 today b. 60 in 1972 and 120 today c. 90 in 1972 and 150 today d. None of the above is correct.

C

In an imaginary economy, consumers buy only shirts and pants. The fixed basket consists of 6 shirts and 4 pairs of pants. A shirt cost $20 in 2006 and $25 in 2007. A pair of pants cost $30 in 2006 and $40 in 2007. Using 2006 as the base year, which of the following statements is correct? a. For the typical consumer, the number of dollars spent on shirts is equal to the number of dollars spent on pants in each of the two years. b. The consumer price index is 134 in 2007. c. The rate of inflation is 29.17% in 2007. d. All of the above are correct.

C

In the country of Hyrkania, the CPI in 2000 was 120 and the CPI in 2001 was 132. Jake, a resident of Hyrkania, borrowed money in 2000 and repaid the loan in 2001. If the nominal interest rate on the loan was 12 percent, then the real interest rate was a. 12 percent. b. 10 percent. c. 2 percent. d. impossible to determine without knowing the base year for the CPI.

C

Ralph puts money in the bank and earns a 5 percent nominal interest rate. Then, if the inflation rate is 3 percent, a. Ralph will have 3 percent more money, which will purchase 2 percent more goods. b. Ralph will have 3 percent more money, which will purchase 8 percent more goods. c. Ralph will have 5 percent more money, which will purchase 2 percent more goods. d. Ralph will have 5 percent more money, which will purchase 8 percent more goods.

C

Ruth collected Social Security payments of $220 a month in 1985. If the price index rose from 90 to 105 between 1985 and 1986, then her Social Security payments for 1986 should have been about a. $252.43. b. $253.00. c. $256.67. d. None of the above is correct.

C

Samantha deposits $1,000 in a saving account that pays an annual interest rate of 4 percent. Over the course of a year the inflation rate is 1 percent. At the end of the year Samantha has a. $50 more in her account, and her purchasing power has increased by about $30. b. $40 more in her account, and her purchasing power has increased by about $40. c. $40 more in her account, and her purchasing power has increased by about $30. d. $30 more in her account and her purchasing power has increased by about $50.

C

Suppose the price index in 2004 was 100; the price index in 2005 was 118; and the inflation rate between 2005 and 2006 was lower than it was between 2004 and 2005. This means that a. the price index in 2006 was lower than 118.00. b. the price index in 2006 was lower than 136.00. c. the price index in 2006 was lower than 139.24. d. the inflation rate between 2005 and 2006 was lower than 1.18 percent.

C

Suppose the price index in 2004 was 104; the price index in 2005 was 134; and the inflation rate between 2005 and 2006 was higher than it was between 2004 and 2005. This means that a. the price index in 2006 was higher than 134.00. b. the price index in 2006 was higher than 164.00. c. the price index in 2006 was higher than 172.65. d. the price index in 2006 was higher than 182.22

C

The price index in the first year is 150; in the second year it is 160; and in the third year it is 175. The inflation rate is about a. 1.07 percent between the first and second years, and 1.09 percent between the second and third years. b. 5.4 percent between the first and second years, and 9.4 percent between the second and third years. c. 6.7 percent between the first and second years, and 9.4 percent between the second and third years. d. 10 percent between the first and second years, and 1.09 percent between the second and third years.

C

The price index is 320 in one year and 360 in the next year. What was the inflation rate? a. 6.7 percent b. 8 percent c. 12.5 percent d. 40 percent

C

Thomas earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 for 2001 and 265.5 for 2006. Thomas's 2001 salary in 2006 dollars is a. $33,333.33. b. $56,666.67. c. $75,000.00. d. $105,000.00.

C

You know that a candy bar cost five cents in 1962. 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 today's prices? a. five cents × (1962 CPI/ today's CPI) b. five cents × (1962 CPI/(today's CPI - 1962 CPI)) c. five cents × (today's CPI/1962 CPI) d. five cents × today's CPI - five cents × 1962 CPI.

C

Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8. In Mexico it rose from 97.2 to 102.3. What were the inflation rates for Canada and Mexico over this one-year period? a. 3.3 percent for Canada and 6.7 percent for Mexico b. 3.3 percent for Canada and 5.2 percent for Mexico c. 2.8 percent for Canada and 6.7 percent for Mexico d. 2.8 percent for Canada and 5.2 percent for Mexico

D

Grant Smith was a doctor in 1944 and earned $12,000 that year. His daughter, Lisa Smith, is a doctor today and she earned $210,000 in 2005. The price index in 1944 was 17.6 and the price index in 2005 was 184. Grant Smith's 1944 income in 2005 dollars is about a. $75,971. b. $80,777. c. $120,682. d. $125,455.

D

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced a. 10 percent inflation between years 1 and 2 ,and 5 percent inflation between years 2 and 3. b. 10 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3. c. 11.1 percent inflation between years 1 and 2, and 5 percent inflation between years 2 and 3. d. 11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.

D

If this year the CPI is 125 and last year it was 120, then a. the cost of the CPI basket of goods and services has increased this year by 4.17 percent. b. the price level as measured by the CPI has increased by 4.17 percent. c. the inflation rate for this year is 4.17 percent. d. All of the above are correct.

D

In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. President Hoover's 1931 salary was equivalent to a 2005 salary of about a. $1,455,995. b. $1,254,262. c. $1,125,008. d. $962,171.

D

In 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 costs about a. $3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. b. $3.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. c. $4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. d. $4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

D

In 1969, Don bought a Dodge Dart for $2,500. He drove this car until 2003 when he bought a Honda Civic for $18,000. If the price index in 1969 was 36.7 and the price index in 2006 was 180, what is the price of the Dodge Dart in 2006 dollars? a. $3,583 b. $4,500 c. $9,762 d. $12,262

D

In Japan in 2000, nominal interest rates were 1.5 percent and the inflation rate was -0.5 percent. The real interest rate was a. -2 percent. b. -1 percent. c. 1 percent. d. 2 percent.

D

In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket consists of 10 hot dogs and 6 hamburgers. A hot dog cost $3 in 2006 and $5.40 in 2007. A hamburger cost $5 in 2006 and $6 in 2007. Which of the following statements is correct? a. When 2006 is chosen as the base year, the consumer price index is 90 in 2007. b. When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007. c. When 2007 is chosen as the base year, the consumer price index is 100 in 2006. d. When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007.

D

Jake loaned Elwood $5,000 for one year at a nominal interest rate of 10 percent. After Elwood repaid the loan in full, Jake complained that he could buy 4 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $5,000. From this we can conclude that the rate of inflation during the year was a. 2.5 percent. b. 6 percent. c. 8 percent. d. 14 percent.

D

Mavis Corporation has an agreement with its workers to index completely the wage of its employees to the CPI. Mavis currently pays its production line workers $7.50 an hour and is scheduled to index their wages today. If the CPI is currently about 130 and was 120 a year ago, Mavis should increase the hourly wages of its workers by about a. $0.075. b. $0.10. c. $0.58. d. $0.63.

D

Refer to Table 11-2. Suppose the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the inflation rate for 2006 if the base year is 2005? a. 21.33 percent b. 25.00 percent c. 28.89 percent d. 36.11 percent

D

Suppose the CPI was 108 in 1967, and suppose one must spend $936 today to obtain the same basket of goods and services that could be bought for $200 in 1967. Then today's CPI is a. 410.10. b. 433.33. c. 468.00 d. 505.44.

D

Suppose the nominal interest rate is 6 percent and the expected inflation rate is 4 percent. a. The dollar value of savings increases by 10 percent and the value of savings measured in goods is expected to increase by 6 percent b. The dollar value of savings increases by 10 percent and the value of savings measured in goods is expected to increase by 4 percent c. The dollar value of savings increases by 6 percent and the value of savings in goods is expected to increase by 4 percent d. The dollar value of savings increases by 6 percent and the value of savings in goods is expected to increase by 2 percent

D

Suppose the nominal interest rate was 5 percent and the inflation rate was 3.5 percent. a. The dollar value of savings increased at 1.5 percent, and the value of savings measured in goods increased at 3.5 percent. b. The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 1.5 percent. c. The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 5 percent. d. The dollar value of savings increased at 5 percent, and the value of savings measured in goods increased at 1.5 percent.

D

Suppose the price of a quart of milk rises from $1 to $1.25 and the price of a T-shirt rises from $8 to $10. If the CPI rises from 150 to 175, then people likely will buy a. more milk and more T-shirts. b. more milk and fewer T-shirts. c. less milk and more T-shirts. d. less milk and fewer T-shirts.

D

Suppose, over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. a. The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent. b. The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent. c. The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 1 percent. d. The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent.

D

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is a. about 80 percent of Ruth's salary. b. about the same as Ruth's salary. c. about twice Ruth's salary. d. more than four times Ruth's salary.

D

Which of these changes in the price index produces the greatest rate of inflation: 100 to 110, 150 to 165, or 180 to 198? a. 100 to 110 b. 150 to 165 c. 180 to 198 d. All three changes show the same rate of inflation.

D

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

D