Econ ch 22

Government statisticians at the U.S. Bureau of Labor Statistics calculate the CPI based on the prices in a _______________ that represents the purchases of __________________.

fixed basket of goods and services; the average family of four

The components with the highest weights in the Consumer Price Index are _____________.

housing, and food and beverage

Which of the following categories enter the calculation of CPI?

transportation (new vehicles, airline fares, gasoline, motor vehicle insurance) education and communication (college tuition, postage, telephone services, computer software and accessories) apparel (men's shirts and sweaters, women's dresses, jewelry)

At the beginning of 2017, $1 had about the same purchasing power in overall terms of goods and services as ___________did in 1972.

18 cents

The inflation rate is most commonly derived from which of the following macroeconomics measures

The Consumer Price Index

The Eight Major Categories in the Consumer Price Index are:

1. Food and beverages (breakfast cereal, milk, coffee, chicken, wine, full-service meals, and snacks) 2. Housing (renter's cost of housing, homeowner's cost of housing, fuel oil, bedroom furniture) 3. Apparel (men's shirts and sweaters, women's dresses, jewelry) 4. Transportation (new vehicles, airline fares, gasoline, motor vehicle insurance) 5. Medical care (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) 6. Recreation (televisions, cable television, pets and pet products, sports equipment, admissions) 7. Education and communication (college tuition, postage, telephone services, computer software, and accessories) 8. Other goods and services (tobacco and smoking products, haircuts and other personal services, funeral expenses

Which of the following is true about the Employment Cost Index?

It can be used to measure of wage inflation in the labor market.

Which of the following is true about the GDP deflator?

It is a price index that is based on all the GDP components.

Which of the following is true about the International Price Index?

It is based on the prices of merchandise that is exported or imported.

The inflation rate captures year-on-year price level differences. If in 2006 the inflation rate was 5% and in 2005 the inflation rate was 6%, this implies that

between 2005 and 2006, the price level rose at a slower rate

When the Bureau of Labor Statistics uses economic studies in computers to adjust for changes in speed, memory, screen size, and other product characteristics, and then calculate the change in price after accounting for these product changes, this is a way for it to solve the problem of _______________

quality/new goods bias

Inflation is a general and ongoing _____________ in the _______________ in an entire economy.

rise; level of prices

Suppose that in 2008 the price of chicken relative to fish goes up. As a result, households start to move away from purchasing chicken and move toward purchasing more fish. This is an example of ________________.

substitution behavior