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Exam 24: Measuring the Cost of Living

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Question 271

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Table 24-15 ​ The following table shows the prices of good X and good Y for 2013-2015. In addition, assume the basket of goods used to compute the Consumer Price Index consists of 3 units of good X and 4 units of good Y. ​ ​ -Refer to Table 24-15. If the base year is 2014, the value of the Consumer Price Index in 2013 is​

A) ​41.2.
B) ​58.8.
C) ​93.0.
D) ​114.0.

E) A) and B)
F) B) and C)

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Question 272

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Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

A) True
B) False

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Question 273

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In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years?

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?

Scenario 24-5 TOPICS: Price levels Inflation KEYWORDS: BLOOM'S: Application CUSTOM ID: 012.24 - SAE - MANK08 Scenario 24-6 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-6. Using 2010 as the base year, what is the CPI in each year?

In the late 1970s, U.S. nominal interest rates were high and real interest rates were low, but in the late 1990s, U.S. nominal interest rates were low and real interest rates were high.

When consumer spending is broken down into the major categories of goods and services, the largest single category is spending on transportation.

The consumer price index is used to

To calculate the CPI, the Bureau of Labor Statistics uses

The inflation rate is defined as the

If the cost of transportation increases by 20 percent, then, other things the same, the CPI is likely to increase by about

Table 24-12. Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. -Refer to Table 24-12. Suppose Will's 2009 food expenditures in 2011 dollars amount to $5,670. Then

If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

Explain how the prices of goods and services used in the CPI differ from the prices used in the PPI.

If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is

Many economists believe the bias in the CPI is now only about half as large as it once was.

Compute how much each of the following items is worth in terms of today's dollars using 177 as the price index for today. a.In 1926, the CPI was 17.7 and the price of a movie ticket was $0.25. b.In 1932, the CPI was 13.1 and a cook earned $15.00 a week. c.In 1943, the CPI was 17.4 and a gallon of gas cost $0.19.

With respect to the consumer price index, the substitution bias arises because

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator.