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Suppose higher prices lead consumers to switch from shopping at Abercrombie & Fitch to shopping at Wal-Mart.If the CPI does not reflect this change,it is referred to as


A) a new goods bias.
B) a quality change bias.
C) an outlet substitution bias.
D) a new price bias.
E) store bias.

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

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-Scott worked in a large foreign country.He retired in 2008 and his pension income is fixed at $1,500 per month.The table above gives the CPI in this country.What is the real monthly value of his pension in the years between 2008 and 2011? -Scott worked in a large foreign country.He retired in 2008 and his pension income is fixed at $1,500 per month.The table above gives the CPI in this country.What is the real monthly value of his pension in the years between 2008 and 2011?

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To calculate the real value of the pensi...

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Suppose in year 1 the CPI is 90,in year 2 the CPI is 100,and in year 3 the CPI is 110.Then,inflation is


A) 100 percent in year 1.
B) 11 percent between years 1 and 2.
C) 11 percent between years 2 and 3.
D) 10 percent between years 2 and 3.
E) Both answers B and D are correct.

F) A) and B)
G) A) and C)

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-The table above gives the U.S.CPI for six years.Calculate the inflation rates between 1997 to 1998,1998 to 1999,1999 to 2000,2000 to 2001,and 2001 to 2002. -The table above gives the U.S.CPI for six years.Calculate the inflation rates between 1997 to 1998,1998 to 1999,1999 to 2000,2000 to 2001,and 2001 to 2002.

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Between 1997 to 1998,the inflation rate ...

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-Consumers in a country buy only two goods,sneakers and manicures.The prices and quantities purchased by urban households are in the table above.The reference base year is 2011.For these data,the CPI for 2012 is A) 145. B) 100. C) 160. D) 10. E) 110. -Consumers in a country buy only two goods,sneakers and manicures.The prices and quantities purchased by urban households are in the table above.The reference base year is 2011.For these data,the CPI for 2012 is


A) 145.
B) 100.
C) 160.
D) 10.
E) 110.

F) A) and E)
G) None of the above

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The ________ is the average hourly wage rate measured in current dollars,while the ________ is the average hourly rate measured in the dollars of a given reference base year.


A) real interest rate;nominal interest rate
B) nominal wage rate;real wage rate
C) real wage rate;nominal wage rate
D) nominal interest rate;real interest rate
E) inflation rate;real wage rate

F) A) and D)
G) A) and C)

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-The table above gives the CPI market basket for 2010 and 2011.Suppose that 2010 is the reference base period. a.What is the cost of the CPI market basket in 2010? b.What is the cost of the CPI market basket in 2011? c.What is the CPI for 2010? d.What is the CPI for 2011? -The table above gives the CPI market basket for 2010 and 2011.Suppose that 2010 is the reference base period. a.What is the cost of the CPI market basket in 2010? b.What is the cost of the CPI market basket in 2011? c.What is the CPI for 2010? d.What is the CPI for 2011?

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a.The cost of the CPI market basket in 2...

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In 2013,the reference base period for the CPI for the nation of Webot,a typical consumer spent $30 on potatoes and $150 on steak.If the price of steak is $15 and the price of potatoes is $1 then there are ________ units of steak and ________ units of potatoes in the CPI market basket.


A) 30;150
B) 10;30
C) 150;30
D) 5;30
E) None of the above answers is correct.

F) D) and E)
G) B) and E)

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A country's CPI was 84.5 last year and 100.0 this year.The inflation rate was


A) 84.5 percent.
B) 18.3 percent.
C) 15.5 percent.
D) 7.29 percent.
E) -18 percent.

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

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The items included in the CPI are


A) final goods produced in the United States.
B) final goods and services produced in the United States.
C) goods and services consumed by the typical urban household.
D) only goods and services produced within the current year and consumed by the typical household.
E) goods but not services consumed by the typical urban household.

F) A) and B)
G) C) and D)

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An example of the outlet substitution bias in the calculation of the CPI is a price increase in


A) GPS units versus AAA map books.
B) olive oil versus vegetable oil.
C) a 2014 Honda Civic relative to a 2004 Honda Civic.
D) textbooks bought through the campus bookstore relative to textbooks via Craigslist.
E) a trip to Mexico for a couple that had previously taken vacations in Europe.

F) A) and D)
G) A) and E)

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Caroline has saved $100,000 for her retirement.She earned 4 percent interest on that money during the year 2013.If the inflation rate was 1 percent in 2013,what was Caroline's real interest rate?


A) $4,000
B) 4 percent
C) 3 percent
D) 1 percent
E) 5 percent

F) B) and D)
G) A) and B)

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Suppose Mack's wage was $7.00 an hour in 2001 and was $12.00 per hour in 2012.The CPI was 94 in 2001 and 201 in 2012.The 2001 wage in terms of 2012 dollars is


A) $14.97.
B) $14.07.
C) $3.48.
D) $13.16.
E) $7.00.

F) A) and E)
G) A) and D)

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A change in the real wage rate measures the change in the


A) price of goods and services that an hour's work can buy.
B) nominal wage of an hour's work.
C) quantity of goods and services that an hour's work can buy.
D) inflation rate affecting the labor market.
E) CPI.

F) A) and E)
G) C) and D)

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In the United States,the inflation rate since 1999 generally was


A) higher than between 1979 to 1981.
B) higher than in the 1980s.
C) lower than between 1979 to 1981.
D) much higher than between 1985 to 1995.
E) negative.

F) B) and C)
G) All of the above

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Assume that after you graduate,you move to a simple economy in which only three goods are produced and consumed: fish,fruit,and meat.Suppose that on January 1,fish sold for $2.50 per pound,meat was $3.00 per pound,and fruit was $1.50 per pound.At the end of the year,you discover that the catch was low and that fish prices had increased to $5.00 per pound,but fruit prices stayed at $1.50 per pound,and meat prices had actually fallen to $2.00.Can you say what happened to the overall CPI,in terms of whether it increased,decreased,or stayed the same? Do you have enough information to calculate the inflation rate? Note,this problem requires no calculation;just state and explain your answers.

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You cannot say what happened to the CPI ...

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The data in the table above shows the consumption by families in an economy.The year 2013 is the reference base period. -Based on the table above,the cost of the base period market basket in the base period is A) $3,300. B) $21.00. C) $3,250. D) $4,650. E) $4,885. The data in the table above shows the consumption by families in an economy.The year 2013 is the reference base period. -Based on the table above,the cost of the base period market basket in the base period is


A) $3,300.
B) $21.00.
C) $3,250.
D) $4,650.
E) $4,885.

F) A) and D)
G) A) and E)

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Which of the following is true?


A) The real interest rate is always positive.
B) The nominal interest rate is usually negative.
C) The real interest rate can be negative.
D) The real interest rate can never be zero.
E) The nominal interest rate is usually less than the real interest rate.

F) A) and D)
G) C) and D)

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In the 1970s,a period of a high rate of inflation,a news magazine article listed people who were losing from inflation because their real purchasing power was falling.Those who lost the most were university professors.Which of the following explains this?


A) The marginal benefit of their work was falling.
B) Their wage rates did not increase as much as the CPI.
C) Their wage rates increased more rapidly than the CPI.
D) The professors suffered from the CPI bias.
E) The professors' market basket was different than the market basket used to calculate the CPI.

F) All of the above
G) B) and E)

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If the GDP price index is 137,this value means that prices have increased


A) 137 percent in the last year.
B) 37 percent in the last year.
C) 37 percent since the base year.
D) 137 percent since the base year.
E) 63 percent since the base year.

F) C) and D)
G) A) and E)

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