Deck 7: The Cpi and the Cost of Living

Question 1

In order to determine if the quantity of goods and services that an hour's work can buy has
Increased or decreased between 2000 and 2012, one should compare the

A)2000 nominal wage with the 2012 real wage.
B)2000 nominal wage with the 2012 nominal wage.
C)2000 real wage with the 2012 nominal wage.
D)2000 real wage with the 2012 real wage.
E)2000 nominal wage with the 2012 nominal wage and the 2000 real wage with the 2012 real wage because both are important factors determining if workers can buy more or fewer goods with an hour's work.

Answer 1

D

Question 2

If prices have increased since the base period, then

A)real GDP is equal to nominal GDP.
B)real GDP is larger than nominal GDP.
C)real GDP can no longer be compared to nominal GDP.
D)real GDP is smaller than nominal GDP.
E)there is no way to adjust nominal GDP so that it equals real GDP.

Answer 2

D

Question 3

The Consumer Price Index (CPI)measures

A)the average of the costs paid by businesses to produce a fixed market basket of consumer goods and services.
B)the prices of those consumer goods and services that increased in price.
C)the average of the prices paid by urban consumers for a fixed market basket of goods and services.
D)the prices of a few consumer goods and services.
E)consumer confidence in the economy.

Answer 3

C

Question 4

Suppose that residents of France have seen their real wage rate increase over time. This means that

A)French workers have increased buying power .
B)French workers have increased their average hours of labor over time.
C)French workers have received increases in their nominal wage rate over time.
D)the CPI must have decreased over time.
E)French workers' inflation rate has increased over time.

Question 5

Joe buys chicken and beef. If the price of beef rises and the price of chicken does not change, Joe will buy _ for the CPI.

A)more beef and create a new goods bias
B)more chicken and eliminate the commodity substitution bias
C)more chicken and create a commodity substitution bias
D)less chicken and beef and create a quality change bias
E)the same quantity of beef and chicken and create a commodity substitution bias

Question 6

To measure the CPI, the BLS economic assistants check the prices of

A)about 8,000 goods and services every year.
B)about 8,000 goods and services every month.
C)about 80,000 goods and services every month.
D)about 80,000 goods and services every year.
E)only the goods and services whose prices have changed every month.

Question 7

If the cost of the CPI market basket at current period prices is $1000 and the cost of the CPI market basket at base period prices is $250, the CPI is

A)100.
B)2.50.
C)4.0.
D)250.
E)400.

Question 8

If your nominal income is $80,000 and your real income in base year prices is $71,500, what is the
CPI?

A)100
B)89
C)106
D)150
E)112

Question 9

In a small, agricultural nation, consumers buy only steak and potatoes. In 2009, the base year, the typical consumer spent $potatoes on strawberries and $100 on steak. The price of potatoes is $1 and the price of steak is $2 in 2009. In 2009, the price of potatoes is $2 and the price of steak is $1. The CPI for 2010 is

A)25 percent.
B)100.
C)110.
D)80.
E)125.

Question 10

The real interest rate equals the

A)nominal interest rate - inflation rate.
B)inflation rate - nominal interest rate.
C)(nominal interest rate + inflation rate)× 100.
D)nominal interest rate + inflation rate.
E)(nominal interest rate ÷ inflation rate).

Question 11

If the nominal wage is $30 in 2011 and the CPI is 202 in 2011, then the real wage in 1982-1984
Dollars

A)is $29.00.
B)is $14.85.
C)is $1.48.
D)is $30.
E)cannot be calculated without the past year wage rate.

Question 12

For the purpose of measuring the cost of living for consumers, one reason the GDP price index is
NOT a good substitute for the CPI is because the GDP price index

A)and the CPI move in the same direction over time.
B)includes the prices of exported goods, which are not consumed in the United States.
C)compares a current year basket of goods with a base year basket of goods.
D)compares current year's prices with base year's prices.
E)has a larger bias than does the CPI.

Question 13

The GDP deflator measures

A)the price level.
B)nominal GDP.
C)the quantity level.
D)the quality of the goods and services in GDP.
E)real GDP.

Question 14

The CPI is reported once every

A)quarter.
B)other year.
C)year.
D)week.
E)month.

Question 15

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

A)a 2012 Toyota Camry versus a 2005 Honda Civic.
B)a GPS unit versus a AAA map book.
C)new homes because people's incomes have increased.
D)etexts versus used books bought through Craigslist.
E)turkey when the price of chicken doesn't rise.

Question 16

Consumers in Beachland consume only two goods, sodas and DVDs. If they spend $10 on sodas
And $90 on DVDs a month, how many sodas and DVDs are in their CPI market basket if the price of
A soda is $1 and the price of a DVD is $9?

A)1 soda and 9 DVDs
B)10 sodas and 10 DVDs
C)9 sodas and 1 DVD
D)10 sodas and 9 DVDs
E)It is impossible to determine the market basket without information on the quantity of at least one of the two goods consumed.

Question 17

The CPI was 170 last year and is 190 this year. What is the inflation rate between these two years?

A)10.5 percent
B)15.0 percent
C)11.8 percent
D)18 percent
E)20 percent

Question 18

In 1970, the CPI was 39 and in 2000 it was 172. A local phone call cost $0.10 in 1970. What is the
Price of this phone call in 2000 dollars?

A)$0.44
B)$1.72
C)$0.23
D)$1.42
E)$0.39

Question 19

Suppose the Bureau of Labor Statistics uses Ballpark Franks as the hot dogs used when calculating the consumer price index. During 2012, Oscar Mayer aggressively reduces prices. Consumers respond by purchasing more Oscar Mayer and less Ballpark Franks. The 2012 CPI is likely to

A)understate the average prices paid by businesses.
B)neither understate nor overstate the average prices because some consumers will still buy Ballpark Franks.
C)overstate the average prices paid by consumers.
D)overstate the average prices paid by businesses.
E)understate the average prices paid by consumers.

Question 20

Economists agree that the CPI

A)is a near perfect measure of the cost of living.
B)almost always shows the cost of living rising less rapidly than is the case in reality.
C)overstates inflation by about 4.1 percentage points a year.
D)is a possibly biased measure of the cost of living.
E)has no relation to the cost of living.

Question 21

$\begin{array} { l c c c c } \hline \text { Item } & \begin{array} { c } \text { Quantity } \\\mathbf { ( 2 0 1 1 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 1 ) }\end{array} & \begin{array} { c } \text { Quantity } \\\mathbf { ( 2 0 1 2 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 2 ) }\end{array} \\\hline \text { Pens } & 400 & \$ 1.00 & 400 & \$ 1.02 \\\text { CDs } & 200 & \$ 15.00 & 200 & \$ 15.90 \\\hline\end{array}$
Consumers in a country buy only two goods, pens and CDs. The prices and quantities purchased by urban households are in the table above.

-If 2011 is the reference base year, the cost of the CPI market basket in the base year is

A)$3,508.
B)$3,500.
C)$3,408.
D)$3,400.
E)$3,580.

Question 22

If the bank returns $1,060 on the $1,000 deposited for a year during which inflation was 4 percent,
The real interest rate is

A)10 percent.
B)2 percent.
C)6 percent.
D)-2 percent.
E)16 percent.

Question 23

The Consumer Price Index measures the average of the prices paid by urban consumers for a_________
Of consumer goods and services.

A)subjective selection
B)random selection
C)fixed market basket
D)least-cost market basket
E)changing selection

Question 24

$\begin{array} { l c c l } \hline { \text { Item } } & \begin{array} { c } \text { Quantity } \\( \mathbf { 2 0 0 0 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 0 0 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 0 ) }\end{array} \\\hline \text { Movie tickets } & 4 & \$ 5.00 & \$ 7.50 \\\text { Bags of popcorn } & 2 & \$ 3.00 & \$ 3.00 \\\text { Cups of Mt. Dew } & 4 & \$ 1.00 & \$ 1.50 \\\hline\end{array}$
The information in the above table gives the 2000 base period market basket and prices used to construct the CPI for a small nation. The table also has 2010 prices.

- What is the value of the CPI for the base period 2000?

A)140
B)133
C)30
D)100
E)75

Question 25

When a good gets better from one year to the next, the CPI has a what is called

A)commodity substitution bias.
B)new goods bias.
C)outlet substitution bias.
D)magnitude of change bias.
E)quality change bias.

Question 26

The CPI is biased because it

A)does not always take into account the changes in product quality.
B)accurately measures the cost of living but not the cost of producing.
C)does not include services.
D)takes into account the changes in product quality.
E)takes into account the changes in technology.

Question 27

When firms decide how much labor to hire, one of the factors that influences them is the

A)nominal wage rate divided by the price level and then multiplied by 100.
B)nominal wage rate divided by the inflation rate and then multiplied by 100.
C)nominal wage rate plus the inflation rate.
D)real wage rate plus the inflation rate.
E)nominal wage rate minus the inflation rate.

Question 28

If your nominal income is $75,000 and your real income in base year prices is $60,000, what is the
CPI?

A)100
B)125
C)200
D)250
E)80

Question 29

If the CPI is 170 at the beginning of the year and 181 at the end, and a bank is paying a nominal interest rate of 6 percent, we see that

A)the interest nominal rate is negative.
B)the real interest rate is positive and is larger than 1 percent.
C)the real interest rate is negative.
D)the real interest rate is positive and is less than 1 percent.
E)the real interest rate is equal to zero.

Question 30

The nominal wage rate is the

A)average hourly wage rate measured in the dollars of a given reference base year.
B)minimum hourly wage that a company can legally pay a worker.
C)average hourly wage rate measured in current dollars.
D)wage rate after inflation has been adjusted out of it.
E)minimum hourly wage rate measured in the dollars of a given reference base year.

Question 31

The items included in the CPI are

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

Question 32

Since 1305, of the following centuries the inflation rate has been the highest during the

A)16th century.
B)20th century.
C)17th century.
D)15th century.
E)14th century.

Question 33

The difference between nominal and real is

A)nominal is measured in current dollars and real is measured in dollars of a given year.
B)nominal is a number stated in dollars and real is stated with an index number.
C)real is measured in current dollars and nominal is measured in dollars of a given year.
D)real is a number stated in dollars and nominal is stated with an index number.
E)both nominal and real are measured with index numbers, only the nominal index is greater than 100 and the real index is less than 100.

Question 34

Nominal GDP was $12.1 trillion and real GDP is $11 trillion. The GDP price index is_{-------------}

A)110.0
B)90.1
C)91.0
D)1.10
E)121.0

Question 35

The period for which the Consumer Price Index is defined to equal 100 is called the

A)base period.
B)beginning period.
C)starting point.
D)reference base period.
E)zero period.

Question 36

If there is inflation and we compare the changes in a nominal variable over time versus its real counterpart, such as the nominal wage rate versus the real wage rate, we find that the

A)nominal wage rate increases faster because of inflation.
B)real wage rate increases faster because of inflation.
C)two change at a rate that does not depend on the inflation rate.
D)two increase at about the same rate because of inflation.
E)two decrease at about the same rate because of inflation.

Question 37

During this year, nominal GDP in Syldavia was $720 billion and real GDP was $720 billion. The
GDP price index in Syldavia in this year was

A)0, because nominal GDP equaled real GDP.
B)720 billion.
C)-1.
D)720.
E)100.

Question 38

A country reports the total expenditures on the fixed CPI basket for the past three years. The cost of the CPI basket in 2010 was $23,000, the cost of the CPI basket for the reference base period, 2011, was $23,805, and the cost of the CPI basket in 2012 was $24,500. The CPI for 2012 is

A)97.2.
B)93.9.
C)245.0.
D)106.5.
E)102.9.

Question 39

Suppose that last year, the price of strawberries was $2 and the price of milk was $1. This year, the price of milk is $2 and the price of strawberries is $1. Which of the following statements is true?

A)The CPI might increase or decrease depending on the quantities in the CPI market basket.
B)The CPI decreases because strawberries are cheaper.
C)The change in the CPI depends how the market basket changed between the two years.
D)The CPI does not change because the change in the two prices is the same.
E)The CPI increases because milk is more expensive.

Question 40

The bias in the CPI distorts private contracts because

A)a lender that links the interest payments on the loan to the CPI is likely to be worse off than a lender that does not link the interest payments on the loan to the CPI.
B)a future payment that is linked to the CPI is likely to be raised above the true increase in the price level.
C)the CPI cannot properly account for what goods and services a typical urban consumer buys.
D)a worker that links her salary to the CPI is likely to be worse off than a worker that doesn't link her salary to the CPI.
E)a future increase in a payment that is linked to the CPI is likely to be less than the true increase in the price level.

Question 41

The real interest rate is negative if the inflation rate

A)is equal to the nominal interest rate.
B)equals zero.
C)exceeds the real interest rate.
D)exceeds the nominal interest rate.
E)is less than the nominal interest rate.

Question 42

$\begin{array} { l c c c } \hline \text { Item } & \begin{array} { c } \text { Quantity } \\\mathbf { ( 2 0 1 1 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 1 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 2 ) }\end{array} \\\hline \text { Salt } & 2 & \$ 1.00 & \$ 2.00 \\\text { Bread } & 20 & \$ 2.50 & \$ 3.00 \\\hline\end{array}$
The data in the table above shows the consumption by families in a small (poor)economy. The families consume only salt and bread. The reference base period is 2011.

- The CPI in 2012 is

A)118.8
B)100.
C)18.8
D)123.1
E)23.1

Question 43

The average starting salary for a history major is $29,500. If the CPI was 147.5, the real salary is

A)$35,000.
B)$20,000.
C)$43,513.
D)$200.00 an hour.
E)$14,750.

Question 44

Nominal and real wage rates

A)must always change in the same direction and the nominal wage rate must change more rapidly than the real wage rate.
B)must always change in the same direction but could change by different amounts.
C)must always change by the same amount.
D)could change in opposite directions.
E)must always change in opposite directions by the same amount.

Question 45

Each month the CPI is calculated by

A)multiplying the current cost of the CPI market basket by the base period cost and then dividing by 100.
B)recording the new prices and making no other calculation.
C)subtracting the base period cost of the CPI market basket from the current cost and then dividing by 100.
D)dividing the current cost of the CPI market basket by the base period cost and then multiplying by 100.
E)subtracting the current period cost of the CPI market basket from the base period cost and then multiplying by 100.

Question 46

The CPI bias was estimated by the Congressional Advisory Commission on the Consumer Price Index as

A)overstating the actual inflation rate by about 1 percentage point a year.
B)understating the actual inflation rate by about 1 percentage point a year.
C)understating the actual inflation rate by about 5 percentage points a year.
D)understating the actual inflation rate by more than 5 percentage points a year.
E)overstating the actual inflation rate by more than 5 percentage points a year.

Question 47

The CPI is calculated by the Bureau of Labor Statistics on a frequency of every

A)decade, along with the Census.
B)quarter.
C)year.
D)week.
E)month.

Question 48

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)nominal interest rate; real interest rate
D)real wage rate; nominal wage rate
E)inflation rate; real wage rate

Question 49

The reference base period for the CPI has an index number of

A)100.
B)1.
C)10.
D)1,000.
E)0.

Question 50

$\begin{array} { | l | c | c | c | c | } \hline \text { Item } & \begin{array} { c } \text { Quantity } \\( 2011 )\end{array} & \text { Price (2011) } & \begin{array} { c } \text { Quantity } \\\text { (2012) }\end{array} & \text { Price (2012) } \\\hline \text { Magazines } & 400 & \$ 5.00 & 450 & \$ 4.50 \\\hline \text { Movie tickets } & 50 & \$ 6.00 & 200 & \$ 8.00 \\\hline \text { Pizzas } & 100 & \$ 10.00 & 120 & \$ 10.50 \\\hline\end{array}$
The data in the table above shows the consumption by families in an economy. The year 2011 is the reference base period.

-
Based on the table above, the cost of the base period market basket in the base period is

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

Question 51

If the cost of the CPI market basket at current period prices is $275 and the cost of the CPI market basket at base period prices is $350, the CPI is

A)79.
B)350.
C)127.
D)100.
E)275.

Question 52

Sharisse brags to her mother that her starting salary as a management trainee is $36,000, much higher than her mother's starting salary of $21,000 as a management trainee several years ago. If the CPI the year Sharisse begins work is 181.2 and the CPI the year her mother started work was 109.1, Sharisse is

A)wrong. Adjusting for quantity changes, her salary is less than her mother's salary.
B)correct. Adjusting for quantity changes, her salary is more than her mother's salary.
C)correct. Adjusting for price changes, her salary is more than her mother's salary.
D)wrong. Adjusting for price changes, her salary is less than her mother's salary.
E)maybe wrong and maybe right. Adjusting for quantity changes, her salary is less than her mother's salary but with the information given we are unable to further adjust for price changes.

Question 53

Which of the following statements about the CPI is (are)correct?
I The only significant bias in the CPI is the commodity substitution bias.
Ii. The CPI probably overstates inflation by 1.1 percentage points a year.
Iii. As far as the bias in the CPI is concerned, the new goods bias and the outlet substitution biases are irrelevant.

A)i and iii
B)i and ii
C)ii only
D)iii only
E)i only

Question 54

The Consumer Price Index measures the average prices paid by

A)businesses and consumers for a market basket of goods and services.
B)businesses for a fixed market basket of resources.
C)urban consumers for the goods and services that most frequently change in price.
D)businesses for the most frequently used basket of resources.
E)urban consumers for a fixed market basket of goods and services.

Question 55

In the current year, the CPI is 122 and during the previous year the CPI was 115. The inflation rate between these years is

A)6.1 percent.
B)1.61 percent.
C)5.7 percent.
D)-5.7 percent.
E)-6.1 percent.

Question 56

If a private wage contract is agreed upon with a cost of living adjustment such that wage hikes are equal to increases in the CPI,

A)the CPI bias means that workers benefit if the price level rises and the employer benefits if the price level falls.
B)workers exactly keep pace with changes in the cost of living.
C)workers benefit because the CPI increases more rapidly than does the cost of living.
D)the employer benefits because wages will rise less than the change in actual prices.
E)the CPI bias means that workers benefit if the price level falls and the employer benefits if the price level rises.

Question 57

The outlet substitution bias is most likely to put_{-------------}and so_{-------------}the inflation rate.

A)a downward bias into the CPI; understate
B)a downward bias into the CPI; overstate
C)an upward bias into the CPI; understate
D)no bias into the CPI because it is such a small effect; have no effect on
E)an upward bias into the CPI; overstate

Question 58

If a country had a CPI of 105.0 last year and a CPI of 102.0 this year, then

A)the average prices of goods and services increased between last year and this year.
B)there was an error when calculating the CPI this year.
C)the quantity of consumer goods and services produced decreased between last year and this year.
D)the average prices of goods and services decreased between last year and this year.
E)the average quality of goods and services decreased between last year and this year.

Question 59

Because a third of government outlays are linked directly to the CPI, as time passes the CPI bias
Means that the government's outlays are

A)larger than needed to keep pace with the cost of living if the CPI is falling from one year to the next, otherwise the outlays are smaller than needed to keep pace with the cost of living.
B)smaller than needed to keep pace with the cost of living if the CPI is falling from one year to the next, otherwise the outlays are larger than needed to keep pace with the cost of living.
C)larger than needed to keep pace with the cost of living.
D)smaller than needed to keep pace with the cost of living.
E)exactly equal to the changes in the cost of living.

Question 60

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI
Was 172, then the real price of

A)the soda was 15 cents in 1970 and 50 cents in 2007.
B)the 1970 soda in 2007 dollars is 52 cents.
C)the 2007 soda in 1970 dollars is $3.44.
D)a soda has risen 567 percent.
E)a soda has risen 350 percent.

Question 61

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

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

Question 62

When the price of broccoli increase relative to cauliflower, people who buy fresh vegetables Respond by buying more cauliflower and fewer broccoli. As a result, the CPI has a

A)new price bias.
B)outlet substitution bias.
C)quality change bias.
D)new goods bias.
E)commodity substitution bias.

Question 63

The fact the consumers substitute one good for another when prices change is

A)a reason why the CPI is used to calculate inflation rates.
B)not taken into account by the fixed market basket used in calculating the CPI.
C)a reason why the CPI understates the actual change in the cost of living.
D)not important to economists.
E)taken into account by the fixed market basket used in calculating the CPI.

Question 64

The reference base period that the BLS uses to measure the CPI is

A)1993-1995.
B)1998-2000.
C)2005.
D)1982-1984.
E)1967-1969.

Question 65

The real interest rate is equal to the

A)nominal interest rate minus the inflation rate.
B)nominal interest rate plus the inflation rate.
C)nominal interest rate times the inflation rate.
D)nominal interest rate divided by the inflation rate.
E)inflation rate minus the nominal interest rate.

Question 66

The CPI stands for

A)Consumer Price Index.
B)Consumer Paying Index.
C)Citizens Paying Index.
D)Corporate/Consumer Payment Index.
E)Corporate Pricing Index.

Question 67

If in Switzerland in January, 2009 the CPI was 187.4 and in January, 2010 it was 191.1, then the inflation rate in 2010 was

A)1.9 percent.
B)-1.9 percent.
C)3.7 percent.
D)unknown without the base period index number.
E)unknown without the real prices.

Question 68

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

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

Question 69

If the nominal interest rate is greater than the real interest rate,

A)the real interest rate must be negative.
B)lenders must lose because they can only make loans using the real interest rate.
C)it is an indication of economic growth.
D)inflation must be occurring.
E)None of the above answers is correct because it is not possible for the nominal interest rate to exceed the real interest rate.

Question 70

$\begin{array} { l c c l } \hline { \text { Item } } & \begin{array} { c } \text { Quantity } \\( \mathbf { 2 0 0 0 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 0 0 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 0 ) }\end{array} \\\hline \text { Movie tickets } & 4 & \$ 5.00 & \$ 7.50 \\\text { Bags of popcorn } & 2 & \$ 3.00 & \$ 3.00 \\\text { Cups of Mt. Dew } & 4 & \$ 1.00 & \$ 1.50 \\\hline\end{array}$
The information in the above table gives the 2000 base period market basket and prices used to construct the CPI for a small nation. The table also has 2010 prices.

- What is the value of the CPI for
2010?

A)71.4
B)100
C)133
D)140
E)142

Question 71

Real GDP is $1,400 billion and nominal GDP is $1,800. The GDP price index equals

A)2.86.
B)222.2.
C)100.0.
D)128.6.
E)77.0.

Question 72

In June 1960, the price of gasoline in the Midwest was $0.169 per gallon and the CPI was 29.6 with a base period of 1982 to 1984. What was the real price of gasoline per gallon in base period dollars?

A)$0.571 per gallon
B)$0.057 per gallon
C)$0.05 per gallon
D)$0.296 per gallon
E)$0.169 per gallon

Question 73

$\begin{array} { l c c c } \hline \text { Item } & \begin{array} { c } \text { Quantity } \\\mathbf { ( 2 0 1 1 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 1 ) }\end{array} & \begin{array} { c } \text { Price } \\\mathbf { ( 2 0 1 2 ) }\end{array} \\\hline \text { Salt } & 2 & \$ 1.00 & \$ 2.00 \\\text { Bread } & 20 & \$ 2.50 & \$ 3.00 \\\hline\end{array}$
The data in the table above shows the consumption by families in a small (poor)economy. The families consume only salt and bread. The reference base period is 2011.

-The cost of the CPI market basket in 2011 is

A)$64.00.
B)$52.00.
C)$3.50.
D)$5.00.
E)100.

Question 74

When the nominal price of a good increases over time, the real cost of buying the good

A)does not change because income also increases over time.
B)decreases because income also increases over time.
C)might increase, decrease, or stay the same depending on how much income changed.
D)must increase.
E)might increase, decrease, or stay the same depending on how much the CPI changed.

Question 75

In 2013, the reference base period for the CPI for the nation of Wobet, a typical consumer spent $30 on potatoes and $150 on steak. Which of the following is true?

A)We cannot say exactly how many of each good are in the basket.
B)The quantity of the two goods in the basket is the same.
C)The quantity of steak in the basket is larger than the quantity of potatoes.
D)The quantity of potatoes in the basket is larger than the quantity of steak.
E)None of the above answers is correct.

Question 76

Which of the following is true?

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

Question 77

A country reports the total expenditures on the fixed CPI basket for the past three years. The cost of The CPI basket in 2010 was $23,000, the cost of the CPI basket for the reference base period, 2011, Was $23,805, and the cost of the CPI basket in 2012 was $24,500. The CPI for 2010 is

A)100.0.
B)96.6.
C)23.0.
D)106.5.
E)103.5.

Question 78

Suppose a report from the Bureau of Labor Statistics states that the CPI for the year 2012 was 152. What is the percentage point increase in the prices of the goods and services since the reference
Base period?

A)100 percent
B)152 percent
C)252 percent
D)52 percent
E)48 percent

Question 79

If we look at the nominal versus real wage rates paid to Presidents over time, we find that

A)George W. Bush is the highest paid according to real wage rates.
B)George Washington was paid a higher real wage rate than Bill Clinton.
C)the real wage rate has steadily increased to $400,000 per year.
D)George W. Bush's nominal wage is about equal to the average nominal wage paid all presidents.
E)the nominal wage has increased and decreased at different times because of inflation.

Question 80

The price survey of the goods contained in the CPI market basket is conducted

A)infrequently, because of its high cost.
B)every year.
C)every ten years, along with the Census.
D)monthly.
E)every quarter.