MACRO CH. 6 QUESTIONS – Flashcards

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that a. the best baseball players today are about 400 times better off than Babe Ruth was in 1931. b. because prices have also risen, the standard of living of baseball stars hasn't changed since 1931. c. one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. d. one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.

The consumer price index is used to a. monitor changes in the level of wholesale prices in the economy. b. monitor changes in the cost of living over time. c. monitor changes in the level of real GDP over time. d. monitor changes in the stock market.

The consumer price index is used to a. convert nominal GDP into real GDP. b. turn dollar figures into meaningful measures of purchasing power. c. characterize the types of goods and services that consumers purchase. d. measure the quantity of goods and services that the economy produces.

Which of the following is not correct? a. The consumer price index gives economists a way of turning dollar figures into meaningful measures of purchasing power. b. The consumer price index is used to monitor changes in the cost of living over time. c. The consumer price index is used by economists to measure the inflation rate. d. The consumer price index is used to measure the quantity of goods and services that the economy is producing.

The term inflation is used to describe a situation in which a. the overall level of prices in the economy is increasing. b. incomes in the economy are increasing. c. stock-market prices are rising. d. the economy is growing rapidly.

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because a. the CPI is easier to measure. b. the CPI is calculated more often than the GDP deflator is. c. the CPI better reflects the goods and services bought by consumers. d. the GDP deflator cannot be used to gauge inflation.

The CPI is a measure of the overall cost of a. the inputs purchased by a typical producer. b. the goods and services purchased by a typical consumer. c. the goods and services produced in the economy. d. the stocks on the New York Stock Exchange.

Which of the following agencies calculates the CPI? a. the National Price Board b. the Department Of Weight and Measurements c. the Bureau of Labor Statistics d. the Congressional Budget Office

The CPI is calculated a. monthly by the Department of Commerce. b. monthly by the Bureau of Labor Statistics. c. quarterly by the Department of Commerce. d. quarterly by the Bureau of Labor Statistics.

The CPI is calculated a. weekly. b. monthly. c. quarterly. d. yearly.

In the CPI, goods and services are weighted according to a. how long a market has existed for each good or service. b. the extent to which each good or service is regarded by the government as a necessity. c. how much consumers buy of each good or service. d. the number of firms that produce and sell each good or service.

What basket of goods and services is used to construct the CPI? a. a random sample of all goods and services produced in the economy b. the goods and services that are typically bought by consumers as determined by government surveys c. only food, clothing, transportation, entertainment, and education d. the least expensive and the most expensive goods and services in each major category of consumer expenditures

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct? a. The base year is always the first year among the years for which computations are being made. b. It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year. c. The value of the consumer price index is always 100 in the base year. d. The base year is always the year in which the cost of the basket was highest among the years for which computations are being made.

If 2012 is the base year, then the inflation rate for 2012 equals

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was a. 100 in 2012. b. 105 in 2013. c. 109.5 in 2014. d. All of the above are correct.

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was a. 1.06 percent. b. 6 percent. c. 10.6 percent. d. 106 percent.

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate? a. 8.3 percent b. 108.3 percent c. 4.8 percent d. 38.2 percent

Refer to Table 24-1. What belongs in space C? a. 120 b. 25% c. 8.7% d. 12%

Refer to Table 24-1. What belongs in space D? a. 12% b. 154 c. 40% d. 15%

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced a. 5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years. b. 7.5 percent deflation between the first and second years, and 4.3 percent deflation between the second and third years. c. 5.3 percent inflation between the first and second years, and 4.1 percent inflation between the second and third years. d. 7.5 percent inflation between the first and second years, and 4.3 percent inflation between the second and third years.

Refer to Table 24-2. The cost of the basket in 2012 was a. $200. b. $225. c. $235. d. $212.50.

22. Refer to Table 24-3. The cost of the basket in 2012 was a. $108. b. $116. c. $112. d. $224.

Refer to Table 24-4. The cost of the basket in 2012 was a. $32. b. $200. c. $210. d. $247.5.

Refer to Table 24-4. The cost of the basket a. increased from 2012 to 2013 and increased from 2013 to 2014. b. increased from 2012 to 2013 and decreased from 2013 to 2014. c. decreased from 2012 to 2013 and increased from 2013 to 2014. d. decreased from 2012 to 2013 and decreased from 2013 to 2014.

Refer to Table 24-4. The cost of the basket a. increased by $8 from 2012 to 2013. b. increased by $41 from 2012 to 2013. c. increased by $50 from 2012 to 2013. d. increased by $60 from 2012 to 2013.

Refer to Table 24-4. If 2012 is the base year, then the consumer price index was a. 100 in 2012, 123.8 in 2013, and 133.3 in 2014. b. 100 in 2012, 124.2 in 2013, and 133.3 in 2014. c. 210 in 2012, 260 in 2013, and 280 in 2014. d. 100 in 2012, 150 in 2013, and 170 in 2014.

Refer to Table 24-4. If 2013 is the base year, then the consumer price index was a. 80.8 in 2012, 100 in 2013, and 107.7 in 2014. b. 80.5 in 2012, 100 in 2013, and 107.3 in 2014. c. 247.5 in 2012, 307.5 in 2013, and 330 in 2014. d. 210 in 2012, 260 in 2013, and 280 in 2014.

Refer to Table 24-4. If 2014 is the base year, then the consumer price index was a. 75 in 2012, 92.8 in 2013, and 100 in 2014. b. 75 in 2012, 93.2 in 2013, and 100 in 2014. c. 247.5 in 2012, 307.5 in 2013, and 330 in 2014. d. 210 in 2012, 260 in 2013, and 280 in 2014.

Refer to Table 24-4. The inflation rate was a. 24.3 percent in 2013 and 22.5 percent in 2014. b. 23.8 percent in 2013 and 9.5 percent in 2014. c. 23.8 percent in 2013 and 7.7 percent in 2014. d. 24.3 percent in 2013 and 7.3 percent in 2014.

The producer price index measures the cost of a basket of goods and services a. typically produced in the economy. b. produced for a typical consumer. c. sold by producers. d. bought by firms.

The GDP deflator reflects the a. level of prices in the base year relative to the current level of prices. b. current level of prices relative to the level of prices in the base year. c. level of real output in the base year relative to the current level of real output. d. current level of real output relative to the level of real output in the base year.

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February? a. 151.4 b. 81.4 c. 55.1 d. 122.9

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about a. $5,296. b. $1,128,421 c. $1,208,421 d. $17,152,000

When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is a. about three quarters of Ruth's salary. b. about the same as Ruth's salary. c. about twice Ruth's salary. d. more than four times Ruth's salary.

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as a. $4.75 purchased in 1955. b. $20.00 purchased in 1955. c. $95.00 purchased in 1955. d. $500 purchased in 1955.

Suppose that over the past year, the nominal interest rate was 5 percent, the CPI was 150.3 at the end of the year, and the CPI was 144.2 at the beginning of the year. It follows that a. the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 0.8 percent. b. the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 9.2 percent. c. the dollar value of savings increased at 0.8 percent, and the purchasing power of savings increased at 5 percent. d. the dollar value of savings increased at 9.2 percent, and the purchasing power of savings increased at 5 percent.