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Exam 24: Measuring the Cost of Living

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Question 101

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The GDP Deflator reflects

A) the prices of all final goods and services currently produced domestically, as does the CPI.
B) the price of a fixed basket of goods and services purchased by a typical consumer, as does the CPI.
C) the prices of all final goods and services currently produced domestically, while the CPI reflects the price of a fixed basket of goods and services purchased by a typical consumer.
D) the price of a fixed basket of goods and services purchased by a typical consumer, while the CPI reflects the prices of all final goods and services produced domestically.

E) C) and D)
F) None of the above

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Question 102

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Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the CPI for 2012 was

A) 95.7.
B) 100.0.
C) 90.0.
D) 213.6.

E) B) and D)
F) B) and C)

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Question 103

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Suppose the typical basket for the calculation of the CPI includes one computer. Since computers have gotten better over time as a result of technological change, what problem does this create for calculating the CPI?

Suppose the price of a six-pack of cola rises from $3 to $3.75 and the price of a pack of mints rises from $1.25 to $1.75. If the CPI rises from 140 to 182, then people likely will buy

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?

Scenario 24-6 TOPICS: Price levels Inflation KEYWORDS: BLOOM'S: Application CUSTOM ID: 016.24 - SAE - MANK08 Table 24-14 The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period. -Refer to Table 24-14. Calculate the cost of a basket of goods for each month.

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 237 for 2015. President Hoover's 1931 salary was equivalent to a 2015 salary of about

An increase in the price of imported coffee shows up

If the real interest rate is 10.3% and the nominal interest rate is 12.6%, what is the inflation rate?

Changes in the quality of a good

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

Table 24-7. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. -Refer to Table 24-7. Between 2010 and 2011, the cost of living increased by

Table 24-2 The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. -Refer to Table 24-2. If 2013 is the base year, then the inflation rate in 2013 was

Suppose Stan Musial earned $115,000 in 1947. If the CPI was 82 in 1947, and was 246 in 1990, what is Stan Musial's 1947 salary in 1990 dollars?

Table 24-5 The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. -Refer to Table 24-5. If the base year is 2004, then the CPI in 2005 was

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 1980 salary in 2011 dollars?

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.

The CPI and GDP deflator usually tell two different stories about how quickly prices are rising.