Question 1

Which of the following goods is least likely to be in a market basket?

Accepted Answer

A)   Helicopter
B)   Gasoline
C)   Barbie dolls
D)   Breakfast cerealE) C) and D)
F) A) and D)

Question 2

The inflation rate is:

Accepted Answer

A)   the percentage change in the overall price level.
B)   the central concept in microeconomics.
C)   a measure of the rate of increase in the cost of imported goods.
D)   is not something that can be accurately measured with the CPI.E) A) and D)
F) A) and C)

Question 3

Making international comparisons of purchasing power is:

Accepted Answer

A)   generally a straightforward comparison.
B)   complicated by trying to define a "typical" consumer.
C)   only hard when attempting to figure out the true purchasing power of the poor.
D)   All of these statements are true.E) A) and B)
F) A) and C)

Question 4

This table shows the price-level adjustment as compared to the United States.  According to the information in the table shown, if someone were to make $35,000, she would be able to buy the most goods and services if she lived in:

Accepted Answer

A)   Australia.
B)   the United States.
C)   Mexico.
D)   China.E) A) and D)
F) B) and C)

Question 5

When the CPI increases from one year to the next:

Accepted Answer

A)   inflation has occurred.
B)   deflation has occurred.
C)   there has not been a change in the overall price level.
D)   the impact to the general standard of living is hard to measure.E) A) and D)
F) A) and B)

Question 6

The index used for international price comparisons is the:

Accepted Answer

A)   World Bank's International Comparison Program index.
B)   World Bank's World Price Index.
C)   United Nations' World Consumer Price Index.
D)   World Trade Federation's International Price Index.E) C) and D)
F) B) and C)

Question 7

We calculate many different kinds of price indexes:

Accepted Answer

A)   in order to capture a complete picture of how price changes are affecting the economy.
B)   to see how the prices of different groups of goods are changing.
C)   to measure how different groups of people in the economy are being affected by changing prices.
D)   All of these statements are true.E) B) and C)
F) All of the above

Question 8

An example of a nontradable good is:

Accepted Answer

A)   insurance services.
B)   fresh pizza.
C)   a double-decker bus tour of London.
D)   All of these would be considered a nontradable good.E) A) and C)
F) B) and C)

Question 9

This table shows the price-level adjustment as compared to the United States.  According to the table shown, if Bob is earning $30,000 in the United States and Bill is earning $40,000 in Mexico, what can be said about their standards of living?

Accepted Answer

A)   Bill is earning more in real terms than Bob.
B)   Bob is earning more in real terms than Bill.
C)   Bob and Bill are earning the same amount in real terms.
D)   Bob and Bill are earning the same amount in nominal terms.E) A) and B)
F) C) and D)

Question 10

The price index that measures the prices of goods and services purchased by firms is called the:

Accepted Answer

A)   producer price index.
B)   purchasing power index.
C)   consumer price index.
D)   retail sales index.E) B) and D)
F) A) and B)

Question 11

A price index:

Accepted Answer

A)   measures how much the cost of a market basket has risen or fallen relative to the cost in a base time period.
B)   summarizes the changes in the cost of living for only rural consumers.
C)   allows us to see clearly the changes in the cost of a market basket daily.
D)   is generally only used with consumer goods and servicesE) A) and D)
F) A) and C)

Question 12

One fundamental idea in macroeconomics about inflation is:

Accepted Answer

A)   if all wages rise, then inflation doesn't really affect anyone's purchasing power.
B)   when all prices rise, inflation occurs and everyone is worse off.
C)   keeping prices constant is the only way to ensure increasing purchasing power over time.
D)   if all prices decline, the purchasing power of everyone declines.E) A) and C)
F) None of the above

Question 13

According to the table shown, what can be said about the cost of living in 2010?

Accepted Answer

A)   It was lower than in the base year.
B)   People experienced a decrease in the cost of living because the CPI is less than 100.
C)   People experienced an increase in the cost of living because the CPI isn't over 100.
D)   There must have been a recession because the CPI is less than 100.E) A) and B)
F) B) and D)

Question 14

When we say the cost of living has gone down, we mean that, looking broadly over a range of goods and services:

Accepted Answer

A)   a dollar buys less today than it used to buy.
B)   a dollar buys more today than it used to buy.
C)   a dollar buys the same today as it used to buy.
D)   our income has increased to match the cost of those goods.E) A) and B)
F) A) and D)

Question 15

According to the table shown, what happened to the cost of living from 2013 to 2014? The cost of living:

Accepted Answer

A)   increased; consumers became worse off than they would have been if the price level had not changed.
B)   decreased; consumers became worse off than they would have been if the price level had not changed.
C)   increased; consumers became better off than they would have been if the price level had not changed.
D)   decreased; consumers became better off than they would have been if the price level had not changed.E) A) and C)
F) A) and B)

Question 16

Using the information in the table shown, what is the 1999 salary in 2009 dollars?

Accepted Answer

A)   $174,136
B)   $132,692
C)   $105,292
D)   $170,844E) B) and C)
F) B) and D)

Question 17

When the CPI increases from one year to the next:

Accepted Answer

A)   the cost of living has decreased.
B)   deflation has occurred.
C)   people need to spend more money to buy the same amount of goods as the previous year.
D)   All of these statements are true.E) A) and B)
F) A) and C)

Question 18

In an attempt to separate the quality changes from price changes of a product over time, the BLS does a:

Accepted Answer

A)   hedonic quality adjustment by estimating what the price of the item would be without the improved features.
B)   hedonic quality adjustment by estimating the price of similar goods.
C)   qualitative price change by estimating the price of all possible brands of the items.
D)   qualitative market adjustment by estimating the price of the items in all markets.E) All of the above
F) B) and D)

Question 19

Using the information in the table shown, the rate of inflation from 2008 to 2009 was:

Accepted Answer

A)   12.5 %.
B)   11.1 %.
C)   13 %.
D)   17 %.E) B) and D)
F) A) and B)

Question 20

The producer price index is considered a good predictor of future consumer prices because increases in input prices:

Accepted Answer

A)   eventually make it to consumers when they buy the final product.
B)   are accounted for in PPI, and therefore this automatically adjusts the CPI.
C)   are observed first in the PPI, adjusting the CPI downward.
D)   are used by consumers to make decisions on what to buy.E) None of the above
F) B) and D)

Exam 8: The Cost of Living

We calculate many different kinds of price indexes:

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Which of the following goods is least likely to be in a market basket?

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A price index:

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When the CPI increases from one year to the next:

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According to the table shown, what happened to the cost of living from 2013 to 2014? The cost of living:

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In an attempt to separate the quality changes from price changes of a product over time, the BLS does a:

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When we say the cost of living has gone down, we mean that, looking broadly over a range of goods and services:

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When the CPI increases from one year to the next:

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According to the table shown, what can be said about the cost of living in 2010?

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This table shows the price-level adjustment as compared to the United States. According to the table shown, if Bob is earning $30,000 in the United States and Bill is earning $40,000 in Mexico, what can be said about their standards of living?

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An example of a nontradable good is:

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The price index that measures the prices of goods and services purchased by firms is called the:

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Using the information in the table shown, what is the 1999 salary in 2009 dollars?

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The producer price index is considered a good predictor of future consumer prices because increases in input prices:

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The index used for international price comparisons is the:

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This table shows the price-level adjustment as compared to the United States. According to the information in the table shown, if someone were to make $35,000, she would be able to buy the most goods and services if she lived in:

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Using the information in the table shown, the rate of inflation from 2008 to 2009 was:

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Making international comparisons of purchasing power is:

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The inflation rate is:

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One fundamental idea in macroeconomics about inflation is:

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