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University of Miami - ECO 212 1)When the consumer price index falls, the typical family has to spend more dollars to maintain the same standard of living

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University of Miami - ECO 212

1)When the consumer price index falls, the typical family

1. 1. has to spend more dollars to maintain the same standard of living.
   2. can spend fewer dollars to maintain the same standard of living.
   3. finds that its standard of living is not affected.
   4. can save less because they do not need to offset the effects of rising prices.

 

 

 

 

 

 

 

 

2. The inflation rate is calculated
   1. by determining the change in the price index from the preceding period.
   2. by adding up the price increases of all goods and services.
   3. by computing a simple average of the price increases for all goods and services.
   4. by determining the percentage increase in the price index from the preceding period.

 

 

 

 

 

 

 

 

 

3. Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket’s cost was $64? in 2009, the basket’s cost was $68? and in 2011, the basket’s cost was $70. The value of the CPI in 2011 was
   1. 97.14.
   2. 100.10.
   3. 102.94.
   4. 109.38.

 

 

 

 

 

 

 

 

 

4. By not taking into account the possibility of consumer substitution, the CPI
   1. understates the cost of living.
   2. overstates the cost of living.
   3. may overstate or understate the cost of living, depending on how quickly prices rise.
   4. may overstate or understate the cost of living, regardless of how quickly prices rise.

 

 

 

 

 

 

 

 

5. An important difference between the GDP deflator and the consumer price index is that
   1. the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.
   2. the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
   3. the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.
   4. the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.

 

 

 

 

 

 

 

6. A decrease in the price of large tractors imported into the United States from Russia
   1. leaves the GDP deflator unchanged but decreases the consumer price index.
   2. decreases the GDP deflator but leaves the consumer price index unchanged.
   3. decreases both the GDP deflator and the consumer price index.
   4. leaves both the GDP deflator and the consumer price index unchanged.

 

 

 

 

 

 

 

 

 

 

7. 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 229.6 for 2012. President Hoover’s 1931 salary was equivalent to a 2012 salary of about
   1. $4,965.
   2. $1,132,895.
   3. $1,057,894.
   4. $16,080,001.

 

 

 

 

 

 

 

 

 

 

8. If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is
   1. -2.5 percent.
   2. 0.45 percent.
   3. 2.5 percent.
   4. 13.5 percent.

 

 

 

 

 

 

 

 

9. A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today?
   1. 37 cents
   2. b. $4.63

c. $67.65

d. $37.86

 

 

 

 

 

 

 

 

 

10. The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?
    1. - 0.75 percent
    2. - 0.5 percent
    3. 9.5 percent
    4. 9.75 percent

 

 

 

 

 

Table 24-10

 

The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer’s basket consists of 6 baseballs and 2 baseball bats.

 

Year	Price of a Baseball	Price of a Baseball Bat
2008	$3.25	$75
2009	$3.75	$82
2010	$4.50	$96

 

1. Refer to Table 24-10. How much was the cost of the basket in 2008?
   1. $78.25
   2. $84.75
   3. $169.50
   4. $456.50

 

 

 

 

 

2. Refer to Table 24-10. If 2008 is the base year, then the consumer price index was
   1. 100.00 in 2008, 110.03 in 2009, and 117.43 in 2010.
   2. 100.00 in 2008, 110.03 in 2009, and 129.20 in 2010.
   3. 100.00 in 2008, 117.00 in 2009, and 132.50 in 2010.
   4. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

 

 

 

 

 

 

 

3. Refer to Table 24-10. If 2009 is the base year, then the consumer price index was
   1. 83.00 in 2008, 100.00 in 2009, and 132.50 in 2010.
   2. 89.97 in 2008, 100.00 in 2009, and 117.43 in 2010.
   3. 90.88 in 2008, 100.00 in 2009, and 117.43 in 2010.
   4. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

 

 

 

4. Refer to Table 24-10. If 2010 is the base year, then the consumer price index was
   1. 77.40 in 2008, 85.16 in 2009, and 100.00 in 2010.
   2. 50.50 in 2008, 67.50 in 2009, and 100.00 in 2010.
   3. 90.88 in 2008, 85.16 in 2009, and 100.00 in 2010.
   4. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

 

 

 

 

5. Refer to Table 24-10. The inflation rate was
   1. 10.03 percent in 2009 and 17.43 percent in 2010.
   2. 17.00 percent in 2009 and 32.50 percent in 2010.
   3. 10.03 percent in 2009 and 29.20 percent in 2010.
   4. 17.00 percent in 2009 and 29.20 percent in 2010.

 

 

 

 

 

 

 

6. When we are calculating the consumer price index and the inflation rate for a certain year,
   1. the value of the consumer price index may depend on the choice of a base year, but the inflation rate does not depend on the choice of a base year.
   2. the inflation rate may depend on the choice of a base year, but the value of the consumer price index does not depend on the choice of a base year.
   3. both the value of the consumer price index and the inflation rate may depend on the choice of a base year.
   4. neither the value of the consumer price index nor the inflation rate depends on the choice of a base year.

 

 

 

 

11. When the consumer price index falls, the typical family
    1. has to spend more dollars to maintain the same standard of living.
    2. can spend fewer dollars to maintain the same standard of living.
    3. finds that its standard of living is not affected.
    4. can save less because they do not need to offset the effects of rising prices.

 

 

 

 

 

 

 

 

12. The inflation rate is calculated
    1. by determining the change in the price index from the preceding period.
    2. by adding up the price increases of all goods and services.
    3. by computing a simple average of the price increases for all goods and services.
    4. by determining the percentage increase in the price index from the preceding period.

 

 

 

 

 

 

 

 

 

13. Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket’s cost was $64? in 2009, the basket’s cost was $68? and in 2011, the basket’s cost was $70. The value of the CPI in 2011 was
    1. 97.14.
    2. 100.10.
    3. 102.94.
    4. 109.38.

 

 

 

 

 

 

 

 

 

 

 

 

 

14. By not taking into account the possibility of consumer substitution, the CPI
    1. understates the cost of living.
    2. overstates the cost of living.
    3. may overstate or understate the cost of living, depending on how quickly prices rise.
    4. may overstate or understate the cost of living, regardless of how quickly prices rise.

 

 

 

 

 

 

 

 

 

 

 

 

15. An important difference between the GDP deflator and the consumer price index is that
    1. the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers.
    2. the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
    3. the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.
    4. the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.

 

 

 

 

 

 

 

 

 

 

16. A decrease in the price of large tractors imported into the United States from Russia
    1. leaves the GDP deflator unchanged but decreases the consumer price index.
    2. decreases the GDP deflator but leaves the consumer price index unchanged.
    3. decreases both the GDP deflator and the consumer price index.
    4. leaves both the GDP deflator and the consumer price index unchanged.

 

 

 

 

 

 

 

 

 

 

17. 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 229.6 for 2012. President Hoover’s 1931 salary was equivalent to a 2012 salary of about
    5. $4,965.
    6. $1,132,895.
    7. $1,057,894.
    8. $16,080,001.

 

 

 

 

 

 

 

 

 

 

18. If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is
    1. -2.5 percent.
    2. 0.45 percent.
    3. 2.5 percent.
    4. 13.5 percent.

 

 

 

 

 

 

 

 

19. A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today?
    1. 37 cents
    2. b. $4.63

c. $67.65

d. $37.86

 

 

 

 

 

 

 

 

 

20. The consumer price index was 200 in 2008 and 190 in 2009. The nominal interest rate during this period was 4.5 percent. What was the real interest rate during this period?
    1. - 0.75 percent
    2. - 0.5 percent
    3. 9.5 percent
    4. 9.75 percent

 

 

 

 

 

 

Table 24-10

 

The table below shows the prices of baseballs and baseball bats for three years. Assume the typical consumer’s basket consists of 6 baseballs and 2 baseball bats.

 

Year	Price of a Baseball	Price of a Baseball Bat
2008	$3.25	$75
2009	$3.75	$82
2010	$4.50	$96

 

21. Refer to Table 24-10. How much was the cost of the basket in 2008?
    5. $78.25
    6. $84.75
    7. $169.50
    8. $456.50

 

 

 

 

 

22. Refer to Table 24-10. If 2008 is the base year, then the consumer price index was
    5. 100.00 in 2008, 110.03 in 2009, and 117.43 in 2010.
    6. 100.00 in 2008, 110.03 in 2009, and 129.20 in 2010.
    7. 100.00 in 2008, 117.00 in 2009, and 132.50 in 2010.
    8. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

 

 

 

 

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23. Refer to Table 24-10. If 2009 is the base year, then the consumer price index was
    5. 83.00 in 2008, 100.00 in 2009, and 132.50 in 2010.
    6. 89.97 in 2008, 100.00 in 2009, and 117.43 in 2010.
    7. 90.88 in 2008, 100.00 in 2009, and 117.43 in 2010.
    8. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

 

 

 

24. Refer to Table 24-10. If 2010 is the base year, then the consumer price index was
    5. 77.40 in 2008, 85.16 in 2009, and 100.00 in 2010.
    6. 50.50 in 2008, 67.50 in 2009, and 100.00 in 2010.
    7. 90.88 in 2008, 85.16 in 2009, and 100.00 in 2010.
    8. 169.50 in 2008, 186.50 in 2009, and 219.00 in 2010.

 

 

 

 

25. Refer to Table 24-10. The inflation rate was
    1. 10.03 percent in 2009 and 17.43 percent in 2010.
    2. 17.00 percent in 2009 and 32.50 percent in 2010.
    3. 10.03 percent in 2009 and 29.20 percent in 2010.
    4. 17.00 percent in 2009 and 29.20 percent in 2010.

 

 

 

 

 

 

 

26. When we are calculating the consumer price index and the inflation rate for a certain year,
    1. the value of the consumer price index may depend on the choice of a base year, but the inflation rate does not depend on the choice of a base year.
    2. the inflation rate may depend on the choice of a base year, but the value of the consumer price index does not depend on the choice of a base year.
    3. both the value of the consumer price index and the inflation rate may depend on the choice of a base year.
    4. neither the value of the consumer price index nor the inflation rate depends on the choice of a base year.