eco 11

The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3 Refer to Scenario 24-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost Answers:A. $0.55, so golf balls were cheaper in 1975. B. $0.55, so golf balls were cheaper in 2005. C. $7.32, so golf balls were cheaper in 1975. D. $7.32, so golf balls were cheaper in 2005.

A. $0.55, so golf balls were cheaper in 1975.

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is Answers:A. -2 percent. B. 0.4 percent. C. 2 percent. D. 12 percent.

A. -2 percent.

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate? Answers:A. 5.0 percent B. 6.0 percent C. 7.2 percent D. 105 percent

A. 5.0 percent

Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was Answers:A. 95.7. B. 100.0. C. 90.0. D. 213.6.

A. 95.7.

Of Social Security benefits and federal income tax brackets, which is indexed? Answers:A. Both are indexed. B. Only Social Security benefits are indexed. C. Only federal income tax brackets are indexed. D. Neither is indexed.

A. Both are indexed.

As long as prices are rising over time, then Answers:A. the nominal interest rate exceeds the real interest rate. B. the real interest rate exceeds the nominal interest rate. C. the real interest rate is positive. D. 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.

A. the nominal interest rate exceeds the real interest

Refer to Table 24-2. The cost of the basket in 2012 was Answers:A. $200. B. $225. C. $235. D. $212.50.

B. $225.

Refer to Table 24-2. If 2013 is the base year, then the CPI for 2013 was Answers:A. 95.7. B. 100.0. C. 90.0. D. 213.6.

B. 100.0

Refer to Table 24-2. If 2012 is the base year, then the CPI for 2012 was Answers:A. 95.7. B. 100.0. C. 90.0. D. 110.0.

B. 100.0.

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate? Answers:A. The real interest rate is the nominal interest rate times the rate of inflation. B. The real interest rate is the nominal interest rate minus the rate of inflation. C. The real interest rate is the nominal interest rate plus the rate of inflation. D. The real interest rate is the nominal interest rate divided by the rate of inflation.

B. The real interest rate is the nominal interest rate minus the rate of inflation.

The goal of the consumer price index is to measure changes in the Answers:A. costs of production. B. cost of living. C. relative prices of consumer goods. D. production of consumer goods.

B. cost of living.

The CPI is calculated Answers:A. monthly by the Department of Commerce. B. monthly by the Bureau of Labor Statistics. C. quarterly by the Department of Commerce. D. quarterly by the Bureau of Labor Statistics.

B. monthly by the Bureau of Labor Statistics.

If the quality of a good improves while its price remains the same, then the value of a dollar Answers:A. rises and the cost of living increases. B. rises and the cost of living decreases. C. falls and the cost of living increases. D. falls and the cost of living decreases.

B. rises and the cost of living decreases.

The CPI is a measure of the overall cost of Answers:A. the inputs purchased by a typical producer. B. the goods and services purchased by a typical consumer. C. the goods and services produced in the economy. D. the stocks on the New York Stock Exchange.

B. the goods and services purchased by a typical consumer.

The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3. Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is Answers:A. $0.05. B. $0.53. C. $0.73. D. $2.00.

C. $0.73.

Refer to Table 24-2. The cost of the basket in 2013 was Answers:A. $200 B. $225 C. $235 D. $237.5

C. $235

Refer to Table 24-2. If 2012 is the base year, then the CPI for 2013 was Answers:A. 95.7. B. 100.0. C. 104.4. D. 110.0.

C. 104.4.

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is Answers:A. -5 percent. B. 1.67 percent. C. 5 percent. D. 11 percent.

C. 5 percent.

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows: Answers:A. Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate. B. Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. C. Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate. D. Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

C. Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

The inflation rate is calculated Answers:A. by determining the change in the price index from the preceding period. B. by determining the change in the price index from the base year. C. by determining the percentage change in the price index from the preceding period. D. by determining the percentage change in the price index from the base year.

C. by determining the percentage change in the price index from the preceding period.

A COLA automatically raises the wage when Answers:A. GDP increases. B. taxes increase. C. the consumer price index increases. D. the producer price index increases.

C. the consumer price index increases.

Refer to Table 24-2. If 2012 is the base year, then the inflation rate in 2013 was Answers:A. 23.5 percent. B. 1.04 percent. C. 10 percent. D. 4.4 percent.

D. 4.4 percent.

Refer to Table 24-2. If 2013 is the base year, then the inflation rate in 2013 was Answers:A. 22.5 percent. B. 2.35 percent. C. 10 percent. D. 4.4 percent.

D. 4.4 percent.

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following? Answers:A. Try to include all the goods and services that the typical consumer buys. B. Try to weight the goods and services that the typical consumer buys according to how much consumers buy of each item. C. Survey consumers to determine what the typical consumer buys. D. Survey sellers to determine what the typical consumer buys.

D. Survey sellers to determine what the typical consumer buys.

If 2012 is the base year, then the inflation rate for 2013 equals Answers:A. B. C. D.

a