Question 1

The table shown displays CPI data for 2015 to 2019.  If the base year is 2016, what can be said about the cost of living in 2015?

Accepted Answer

A)   The cost of living in 2015 was lower than in 2016.
B)   The cost of living decreased because the CPI was less than 100.
C)   The cost of living increased because the CPI was less than 100.
D)   There must have been a recession because the CPI is less than 100.E) B) and C)
F) A) and D)

Question 2

The table shown displays the price-level adjustments for Australia, China, and Mexico as compared to the United States.  A person who is earning $50,000 in Australia would need to earn _______ in the United States to enjoy the same standard of living.

Accepted Answer

A)   $75,000
B)   $33,333
C)   $25,000
D)   $37,500E) A) and B)
F) All of the above B

Question 3

When the CPI increases from one year to the next:

Accepted Answer

A)   inflation has occurred.
B)   deflation has occurred.
C)   there has been no change in the overall price level.
D)   it is hard to measure the impact this has on the general standard of living.E) A) and B)
F) C) and D)

Question 4

To determine the income your grandparents would have to earn today in order to have purchasing power equivalent to their income in 1969, you would:

Accepted Answer

A)   translate their nominal income in 1969 into constant, real dollars of today.
B)   translate their nominal income today into 1969 dollars.
C)   take a ratio of their income today with their income from 1969.
D)   look at how the market basket changed between 1969 and today.E) None of the above
F) A) and B)

Question 5

PPP-adjustment involves:

Accepted Answer

A)   recalculating economic statistics to account for differences in price levels across countries.
B)   is very similar to adjusting for cost-of-living increases using a price index like the CPI.
C)   recalculating a variable like GDP per capita so we can compare someone's standard of living across countries.
D)   All of these are true.E) All of the above
F) C) and D)

Question 6

The consumer price index is calculated by the:

Accepted Answer

A)   Bureau of Labor Statistics.
B)   Congressional Budget Office.
C)   National Bureau of Economic Research.
D)   Social Security Office.E) A) and B)
F) A) and C)

Question 7

The table shown displays CPI data for 2015 to 2019.  Which year is most likely being used for the base year?

Accepted Answer

A)   2015
B)   2016
C)   2017
D)   2018E) B) and D)
F) A) and B) B

Question 8

The table shown displays CPI data for 2015 to 2019.  What can be said about the rate of inflation over these dates?

Accepted Answer

A)   Deflation occurred until 2017, then inflation occurred.
B)   Deflation occurred until 2019, then inflation occurred.
C)   Inflation occurred every year from 2015 to 2019.
D)   Inflation was highest from 2015 to 2016.E) A) and D)
F) B) and D)

Question 9

Regardless of the index used:

Accepted Answer

A)   inflation is measured as a percent increase in the index from one year to the next.
B)   the same results for inflation are reached, so each index is equally useful.
C)   the measurement of inflation is the same, so the index that is easiest to calculate is often used.
D)   an accurate picture is portrayed regarding how prices for all consumer goods and services change from year to year.E) C) and D)
F) A) and B)

Question 10

The most commonly used index to track changes in prices for the typical U.S. household is the:

Accepted Answer

A)   consumer price index.
B)   average price index.
C)   retail price index.
D)   producer price index.E) B) and C)
F) A) and B)

Question 11

A dollar's value changes:

Accepted Answer

A)   over time and across different locations.
B)   at the same rate as GDP.
C)   if the government maintains a fixed exchange rate.
D)   the most during the holiday shopping season.E) A) and C)
F) None of the above

Question 12

Suppose the base year of the CPI is 2017, and the CPI calculated for 2019 was 102. What is the correct interpretation of this number?

Accepted Answer

A)   The cost of living for a typical consumer decreased by 2 percent since 2017.
B)   The cost of living for a typical consumer increased by 1.9 percent since 2017.
C)   The cost of living for a typical consumer is 2 percent higher than it was in 2017.
D)   The cost of living is unchanged; the CPI does not measure changes in the price level.E) None of the above
F) A) and B) C

Question 13

Today, Social Security payments:

Accepted Answer

A)   are no longer adjusted for inflation.
B)   are adjusted for inflation using the CPI.
C)   are adjusted for inflation using the PPI.
D)   are adjusted to match changes in GDP.E) A) and B)
F) None of the above

Question 14

The table shown displays CPI data for 2015 to 2019.  What can be said about the cost of living in 2017?

Accepted Answer

A)   The typical consumer had to spend 5 percent more in 2017 than in 2016 in order to buy the same goods.
B)   The price of intermediate goods increased by 5 percent.
C)   The typical consumer could spend 5 percent less to maintain the same standard of living.
D)   None of these are true.E) All of the above
F) None of the above

Question 15

Assume a market basket includes ten boxes of mac and cheese, ten packages of ramen, 5 bottles of soda, and 1 gallon of milk.  According to the table shown, what is the change in the price level between the base year and the current year?

Accepted Answer

A)   11 percent
B)   12 percent
C)   13 percent
D)   14 percentE) A) and D)
F) A) and B)

Question 16

The Big Mac index compares:

Accepted Answer

A)   the cost of a Big Mac all over the world.
B)   the cost of a typical basket for consumers all over the world.
C)   typical food costs across different locations.
D)   typical food and energy costs across different locations.E) C) and D)
F) A) and C)

Question 17

Purchasing power parity doesn't hold exactly in reality because non-tradable goods:

Accepted Answer

A)   cannot be transported and sold for a profit elsewhere, even if the price varies in different locations.
B)   are financial products that naturally have different prices in different stock exchanges.
C)   don't earn enough profit when sold in another country.
D)   are usually placed under trade restrictions.E) A) and B)
F) B) and D)

Question 18

In practice, the three measurements of inflation, the CPI, PPI, and GDP deflator:

Accepted Answer

A)   are used to track price changes at different points in the year.
B)   often show drastically different pictures of inflation in the economy.
C)   focus on different parts of the economy.
D)   only differ when price changes are higher than average.E) B) and C)
F) None of the above

Question 19

COLA stands for:

Accepted Answer

A)   cost-of-living adjustment.
B)   cost-of-living aggregate.
C)   capital operations leasing adjustment.
D)   capital operations leasing agreement.E) A) and B)
F) None of the above

Question 20

Which of the following is a non-tradable good?

Accepted Answer

A)   A bottle of wine from a remote valley in France
B)   A rare gemstone mined in South Africa
C)   A haircut by a renowned Italian hairstylist in Florence
D)   An SUV produced by BMW in South CarolinaE) A) and B)
F) B) and C)

Exam 8: Thecost of Living

The table shown displays CPI data for 2015 to 2019. If the base year is 2016, what can be said about the cost of living in 2015?

Correct AnswerverifiedShow Answer

The table shown displays the price-level adjustments for Australia, China, and Mexico as compared to the United States. A person who is earning $50,000 in Australia would need to earn _______ in the United States to enjoy the same standard of living.

Correct AnswerverifiedB

When the CPI increases from one year to the next:

Correct AnswerverifiedShow Answer

To determine the income your grandparents would have to earn today in order to have purchasing power equivalent to their income in 1969, you would:

Correct AnswerverifiedShow Answer

PPP-adjustment involves:

Correct AnswerverifiedShow Answer

The consumer price index is calculated by the:

Correct AnswerverifiedShow Answer

The table shown displays CPI data for 2015 to 2019. Which year is most likely being used for the base year?

Correct AnswerverifiedB

The table shown displays CPI data for 2015 to 2019. What can be said about the rate of inflation over these dates?

Correct AnswerverifiedShow Answer

Regardless of the index used:

Correct AnswerverifiedShow Answer

The most commonly used index to track changes in prices for the typical U.S. household is the:

Correct AnswerverifiedShow Answer

A dollar's value changes:

Correct AnswerverifiedShow Answer

Suppose the base year of the CPI is 2017, and the CPI calculated for 2019 was 102. What is the correct interpretation of this number?

Correct AnswerverifiedC

Today, Social Security payments:

Correct AnswerverifiedShow Answer

The table shown displays CPI data for 2015 to 2019. What can be said about the cost of living in 2017?

Correct AnswerverifiedShow Answer

Assume a market basket includes ten boxes of mac and cheese, ten packages of ramen, 5 bottles of soda, and 1 gallon of milk. According to the table shown, what is the change in the price level between the base year and the current year?

Correct AnswerverifiedShow Answer

The Big Mac index compares:

Correct AnswerverifiedShow Answer

Purchasing power parity doesn't hold exactly in reality because non-tradable goods:

Correct AnswerverifiedShow Answer

In practice, the three measurements of inflation, the CPI, PPI, and GDP deflator:

Correct AnswerverifiedShow Answer

COLA stands for:

Correct AnswerverifiedShow Answer

Which of the following is a non-tradable good?

Correct AnswerverifiedShow Answer

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C

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