macro hw 1 36-60

38. Which of the following is not correct? a. The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. b. The consumer price index is used to monitor changes in the cost of living over time. c. The consumer price index is used by economists to measure the inflation rate. d. The consumer price index is used to measure the quantity of goods and services that the economy is producing.

d

48. The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of 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. 4 percent b. 11 percent c. 19.6 percent d. 24.4 percent e) none of the above

d

50. In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was 235 in 2013, then what is the price of the Firebird in 2013 dollars? a. $4,609.57 b. $4,957.51 c. $13,508.17 d. $16,008.17 e) none of the above

d

51. In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in a. 1970 and lowest in 1980. b. 1970 and lowest in 1990. c. 1980 and lowest in 1970. d. 1980 and lowest in 1990. e) none of the above

d

44. If consumer price index increases from previous year to this year, inflation rate is a. positive b. negative c. zero d. could be positive or negative

a

57. There are regional difference in prices. Which of the following may have highest difference in prices a. hair-cut b. apples c. pencils d. online purchase of a book

a

42. Which good has more weight in the CPI calculation? a. Food, b. Apparel, c. Housing, d. transportation

c

43. The inflation rate is defined as the a. price level in an economy. b. change in the price level from one period to the next. c. percentage change in the price level from the previous period. d. price level minus the price level from the previous period.

c

46. Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was a. 109.8 and the inflation rate was 9.8%. b. 109.8 and the inflation rate was 16.9%. c. 116.9 and the inflation rate was 9.8%. d. 116.9 and the inflation rate was 16.9%. e) none of the above

c

52. If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is a. -5 percent. b. 1.67 percent. c. 5 percent. d. 11 percent. e) none of the above

c

53. The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was a. -5 percent. b. -1 percent. c. 5 percent. d. 3.2 percent. e) none of the above

c

56. In the US, since 2008 Real interest rate is negative. It implies a. Inflation rate is less than nominal interest rate b. inflation rate is equal to nominal interest rate c. Inflation rate is more than nominal interest rate

c

47. For an imaginary economy, the value of the consumer price index was 140 in 2013 and 146.5 in 2014. The economy's inflation rate for 2014 was a. 4.6 percent. b. 6.5 percent. c. 4.6 percent. d. 46.5 percent. e) none of the above

A and c

36. The consumer price index is used to? a. monitor changes in the level of wholesale prices in the economy. b. monitor changes in the cost of living over time. c. monitor changes in the level of real GDP over time. d. monitor changes in the stock market.

b

37. The consumer price index is used to a. convert nominal GDP into real GDP. b. turn dollar figures into meaningful measures of purchasing power. c. characterize the types of goods and services that consumers purchase. d. measure the quantity of goods and services that the economy produces.

b

39. The CPI is a measure of the overall cost of? 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

41. If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be? a. 2012, b. 2013, c. 2014, d. The base year cannot be determined from the given information.

b

45. The inflation rate you are likely to hear on the nightly news is calculated from a. the GDP deflator. b. the CPI. c. the Dow Jones Industrial Average. d. the unemployment rate.

b

49. If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as a. $4.75 purchased in 1955. b. $20.00 purchased in 1955. c. $95.00 purchased in 1955. d. $500 purchased in 1955. e) none of the above

b

54. When looking at a graph of nominal and real interest rates you notice that nominal rates almost always lie above real rates. From this you conclude a. there were serious episodes of deflation in the time frame represented on the graph. b. Inflation rate is positive c. the economy never experienced a recession in the time frame represented on the graph. d. GDP was always increasing for the time frame represented on the graph.

b

55. In 2009 Real Interest rate is greater than nominal interest rate. It implies a. inflation rate is positive b. inflation rate is negative c. inflation rate is zero d. it has nothing to do with inflation rate

b

58. If inflation rate is 3% and a bank gives you 1% interest on your deposit, you are a) gaining b) losing c) neither gaining nor losing d) doesn't have enough information

b

60) Because of inflation, purchasing power of money a) increases b) decreases c) remains same d) doesn't have enough information

b