question
The CPI is used to monitor change in the cost of living over time.
answer
True
question
A general increase in the price level of goods and services in an economy describes
answer
Inflation
question
The ______ is responsible for calculating and reporting the CPI.
answer
Bureau of Labor Statistics
question
The CPI is a measure of the overall cost of
answer
the goods and services purchased by a typical consumer.
question
The Bureau of Labor Statistics reports the CPI
answer
Monthly
question
The Bureau of Labor Statistics calculates the CPI.
answer
True
question
Coffee is weighted more than tea in the calculation of the CPI if
answer
consumers buy more coffee than tea.
question
The best measure for changes in the price level of a consumer basket of goods and services over time is the
answer
CPI since it measures changes in the prices of a basket of goods and services consumed by a typical consumer over time.
question
The consumer price index is a perfect measure of inflation in our economy.
answer
False
question
The _______ is the most commonly reported measure of inflation by the media.
answer
CPI
question
Substitution bias is a problem when measuring the consumer price index because
answer
prices of goods and services do not change in the same proportion from year to year.
question
Suppose that the prices of dairy products have risen relatively less than prices in general over the last several years. To which problem in the construction of the CPI is this situation most relevant?
answer
Substitutional bias
question
A COLA automatically raises the wage when
answer
the consumer price index increases.
question
Indexation refers to
answer
using a law or contract to automatically correct a dollar amount for the effects of inflation.
question
Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that Social Security recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct?
answer
The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI.
question
When ranking movies by nominal box office receipts, what important fact is overlooked?
answer
Prices, including those for movie tickets, have been rising over time.
question
Which of the following statements about real and nominal interest rates is correct?
A
Real interest rates and nominal interest rates must be positive.
B
Real interest rates and nominal interest rates can be either positive or negative.
C
Real interest rates can be either positive or negative, but nominal interest rates must be positive.
D
Real interest rates must be positive, but nominal interest rates can be either positive or negative.
A
Real interest rates and nominal interest rates must be positive.
B
Real interest rates and nominal interest rates can be either positive or negative.
C
Real interest rates can be either positive or negative, but nominal interest rates must be positive.
D
Real interest rates must be positive, but nominal interest rates can be either positive or negative.
answer
C
Real interest rates can be either positive or negative, but nominal interest rates must be positive.
Real interest rates can be either positive or negative, but nominal interest rates must be positive.
question
The nominal interest rate tells you
answer
how fast the number of dollars in your bank account rises over time.
question
The real interest rate tells you
answer
how fast the purchasing power of your bank account rises over time.
question
The difference between the nominal interest rate and the real interest rate is equal to the inflation rate.
answer
true
question
If the consumer price index was 89 in 2008, 94 in 2010, 100 in 2012, and 103 in 2014, then the base year must be
answer
2012
question
The introduction of new goods creates a problem when measuring the CPI because
answer
the CPI is based on a fixed basket of goods and services and does not reflect increased value as a result of a larger variety of goods.
question
The three problems with using the consumer price index as a measure of the cost of living are
answer
widely acknowledged and difficult to solve.
question
Which of the following statements is correct regarding the CPI and the GDP deflator?
answer
The CPI is better than the GDP deflator at reflecting the prices of goods and services bought by consumers.
question
The GDP deflator is the most commonly reported indicator for inflation because:
answer
The GDP deflator is not more commonly reported than the CPI.
question
The CPI is able to measure changes in the quality of goods over time
answer
imprecisely because it is relatively complicated to measure quality changes.
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