ECON 2100 - Ch. 11 Quiz

If 2012 is the base year, then the inflation rate for 2013 equals

CPI in 2013 - CPI in 2012 / CPI in 2012 * 100

Economics uses the term 'inflation' to describe a situation in which

the economy's overall price level is rising

The CPI is a measure of the overall cost of

the goods and services purchased by a typical consumer

Most economics believe that CPI overstates the true inflation rate, due to the fact that CPI is not adjusted for a. the substitution bias b. unmeasured quality bias c. the new product bias d. all of the above

all of the above

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

$40 purchased in 1975

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $55. The value of the CPI in 2016 was

110.0

product quantity2015 $2015 $2016 $2017 I-pads. 3 300 375. 390 books 10. 42. 50. 58 cell phones 5 500. 620. 630 Suppose an economy has only three goods in the basket for a typical family who purchases the amounts given in the table above.If 2015 is the base year, then what is the inflation rate for 2017? Question options: 11.23 % 3.70% 23.69 % 28.27%

3.70%

If you want to earn a real interest rate of 5% on money you lend, and you expect that inflation will be 3%, what nominal rate of interest will you charge?

8%

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

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

If the CPI changes from 160 to 152 between 2016 and 2017, how did the price change?

Prices decrease by 5%