Deck 16: The Cpi and the Cost of Living

Question 1

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.

Answer 1

goods and services consumed by the typical urban household.

Question 2

The CPI stands for

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

Answer 2

Consumer Price Index.

Question 3

The prices of the goods and services in the CPI market basket are collected

A)monthly.
B)yearly.
C)quarterly.
D)infrequently.
E)only when the CPI market basket is determined by the Consumer Expenditure Survey.

Answer 3

monthly.

Question 4

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

A)all the goods and services produced in a given year.
B)some of the consumer goods but none of the services produced in a given year.
C)about 80,000 goods and services each month.
D)about 80,000 goods and services each quarter.
E)only the prices of the goods and services whose prices have changed.

Question 5

The Consumer Price Index measures the average prices paid by

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

Question 6

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

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

Question 7

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

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

Question 8

The value of the CPI for the reference base period is always

A)100.
B)0.
C)1.
D)50.
E)None of the above,because the value of the CPI is not always the same for all reference base periods.

Question 9

The Consumer Price Index market basket contains

A)the minimal dietary requirements of an average urban household.
B)the U.S.-produced goods and services purchased by an average urban household.
C)the ideal calorie intake of each member of an average urban household.
D)the goods and services purchased by an average urban household.
E)the goods and services that the economists working for the BLS believes consumers should buy.

Question 10

The Consumer Price Index (CPI)measures the changes of the

A)prices paid by consumers for a fixed market basket of consumer goods and services.
B)quantities of a fixed market basket of goods produced by businesses.
C)lowest prices paid by consumers for a fixed market basket of consumer goods and services.
D)prices paid by all businesses for a fixed market basket of production resources.
E)prices paid by consumers and businesses for a fixed market basket of goods and services.

Question 11

The Consumer Price Index is calculated by the

A)Bureau of Labor Statistics.
B)Department of Labor.
C)Department of Commerce.
D)Federal Reserve Bank of New York.
E)Society for Consumer Protection.

Question 12

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

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

Question 13

The reference base period for the CPI is

A)the previous year.
B)whatever the political party that is in control of Congress decides.
C)currently 1913.
D)currently 1982 to 1984.
E)currently 2005.

Question 14

Constructing the CPI involves which of the following stages?
I.conducting the monthly price survey
Ii.converting the CPI to an international index
Iii.selecting CPI market basket

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

Question 15

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

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

Question 16

The Consumer Expenditure Survey measures

A)households' spending patterns.
B)the wholesale price on what consumers buy so that a markup percentage can be found.
C)the maximum price buyers will pay for a good or service.
D)consumers' incomes.
E)the jobs at which consumers work.

Question 17

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 18

For the CPI to provide an accurate measure of the prices paid by urban consumers,it is necessary to

A)assign equal weights to all the goods and services included in the market basket surveyed so that nothing is over-weighted.
B)have a market basket that is consistent and corresponds to what households actually purchase.
C)have prices stated in dollars so consumers can compare what they spend.
D)change the market basket each month to reflect the changes that consumers make.
E)make certain that the incomes of the consumers surveyed do not change because such a change would affect the market basket of the goods and services they buy.

Question 19

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

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

Question 20

The CPI is a measure of the

A)percentage change in the price level.
B)average prices of all goods.
C)average prices paid by consumers for a fixed basket of goods and services.
D)average prices of all goods and services produced.
E)average change in the output of the goods and services purchased by a typical urban consumer.

Question 21

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.

Question 22

The CPI market basket

A)weights the goods and services according to the budget of an average urban household.
B)determines the best possible way of taxing the average urban household.
C)determines how the spending patterns of the average urban household change from month to month.
D)determines how spending patterns change from urban household to urban household.
E)changes from one month to the next in order to calculate the CPI.

Question 23

The CPI market basket is determined by

A)tax return data of households.
B)supermarket purchases recorded by scanner technology.
C)profit releases of the largest companies.
D)a consumer survey.
E)surveys asking large retail companies,such as Wal-Mart,about their sales of consumer goods and services.

Question 24

To find the cost of the CPI market basket in the base period prices we have to multiply the

A)quantities in the CPI market basket by the base period prices.
B)quantities in the CPI market basket by the current period prices.
C)current period quantities in the CPI market basket by the base period prices.
D)current period quantities in the CPI market basket by the current period prices.
E)quantities in the CPI market basket by the base period prices and then multiply by 100.

Question 25

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

Question 26

The table above gives the CPI for a nation.Based on the table,we can determine that the reference base period is

A)1994.
B)1996.
C)1998-2000.
D)2002.
E)More information about when the Consumer Expenditure Survey was undertaken is needed to answer the question.

Question 27

Which of the following changes would have the largest impact on the CPI?

A)a one percent increase in the cost of housing
B)a one percent increase in the cost of transportation
C)a one percent increase in the cost of medical care
D)a one percent increase in the cost of education
E)a one percent increase in the cost of apparel

Question 28

The more money an average household spends on one specific type of good or service per month,the

A)smaller the relative importance of that item in the CPI market basket.
B)larger the relative importance of that item in the CPI market basket.
C)costlier it will be to conduct the Consumer Expenditure Survey.
D)less significant an increase in the price of that good or service will be for the household.
E)more frequently its price is checked when calculating the CPI.

Question 29

To find the cost of the CPI market basket in the current period we have to multiply the

A)quantities in the CPI market basket by the base period prices.
B)quantities in the CPI market basket by the current period prices.
C)current period quantities in the CPI market basket by the base period prices.
D)current period quantities in the CPI market basket by the current period prices.
E)quantities in the CPI market basket by the base period prices and then multiply by 100.

Question 30

The formula for the CPI is

A)(Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at next year's prices)× 100.
B)(Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices)× 100.
C)(Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current period prices)× 100.
D)(Cost of CPI market basket this year × Cost of CPI market basket at base period prices)÷ 100.
E)(Cost of CPI market basket this year × Cost of CPI market basket at base period prices)× 100.

Question 31

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)9 sodas and 1 DVD
B)1 soda and 9 DVDs
C)10 sodas and 9 DVDs
D)10 sodas and 10 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 32

The formula for the CPI is

A)(Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current period prices)× 100.
B)(Cost of CPI market basket at current period prices - Cost of CPI market basket at base period prices)× 100.
C)(Cost of CPI market basket at base period prices - Cost of CPI market basket at current period prices)× 100.
D)(Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices)× 100.
E)(Cost of CPI market basket at current period prices + Cost of CPI market basket at base period prices)× 100.

Question 33

The CPI market basket

A)contains one unit of each good purchased by the average consumer.
B)weights the goods and services according to the budget of an average urban household.
C)is comprised of a representative sample of the goods that the government guesses people buy.
D)includes only goods and not services.
E)includes only U.S.-produced goods and services.

Question 34

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

Question 35

According to the CPI basket,the largest item in the households' budgets is

A)food.
B)housing.
C)transportation.
D)education.
E)apparel.

Question 36

When the price of,say,a package of rice changes,what must the BLS do next?

A)immediately incorporate the new price into the CPI
B)determine if the new price is consistent with other price changes for the period
C)determine if the size,quality,weight,or packing of the rice has changed and adjust the price accordingly
D)ignore the price change
E)immediately incorporate the new price into the CPI only if the price has fallen

Question 37

When calculating the CPI,the Bureau of Labor Statistics

A)weights the price of goods and services in the basket relative to the importance of the average urban household budget.
B)sums the prices of the goods and services in the average urban household consumption basket.
C)weights the price of all goods and services produced in a year within a country's borders.
D)multiplies by 100 the average price of goods and services in the average urban consumer's basket.
E)makes certain to weight the goods and services equally so that no one product is over-weighted.

Question 38

Each month the CPI is calculated by

A)recording the new prices and making no other calculation.
B)multiplying the current cost of the CPI market basket by the base period cost and then dividing by 100.
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 39

For the CPI,the market basket of goods and services is modified

A)each time the Consumer Expenditures Survey is conducted.
B)about every 10 to 20 years.
C)each month when the Price Survey is completed.
D)each year to reflect changes in consumer purchasing habits.
E)at the discretion of the President.

Question 40

What is the good or service is given the most weight in the CPI?

A)apparel
B)food and beverages
C)housing
D)transportation
E)recreation

Question 41

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 2010 is

A)$5.00.
B)$64.00.
C)$8.50.
D)$52.00.
E)unable to be calculated because information is needed about the quantities purchased in 2010.

Question 42

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.The inflation rate between 2011 and 2012 is

A)$15.
B)15.0 percent.
C)$10.
D)10.3 percent.
E)9.0 percent.

Question 43

Consumers in a country buy only two goods,pens and CDs.The prices and quantities purchased by urban households are in the table above.The reference base year is 2011.If the current year is 2012,the cost of the CPI market basket in 2012 is

A)$3,400.
B)$3,588.
C)$3,580.
D)$3,508.
E)$3,500.

Question 44

Suppose that the cost of the CPI basket of goods and services rises from $137 in 2010,which is the base year,to $159 in 2011.The CPI in 2011 is ________ and the inflation rate from 2010 to 2011 is ________.

A)86;14 percent
B)86;22 percent
C)116;22 percent
D)116;16 percent
E)There is not enough information to answer this question.

Question 45

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

Question 46

Suppose that the CPI basket contains only 40 heads of cauliflower and 60 bunches of broccoli.If the price of cauliflower goes down by $1 per head and the price of broccoli goes up by $1 per bunch,then

A)the CPI does not change.
B)the CPI increases.
C)the CPI decreases.
D)the CPI might increase or decrease depending how the quantities are affected by the price changes.
E)There is not enough information to answer this question.

Question 47

When the cost of the CPI market basket increases from one year to the next,we know that

A)on the average,current prices are less than past year prices.
B)the quantities of the goods and services contained in the CPI market basket have increased on the average.
C)the prices of the goods and services contained in the CPI market basket have increased on the average.
D)on the average,current prices are below base year prices.
E)either the quantities of the goods and services contained in the CPI market basket have increased on the average and/or the prices of the goods and services contained in the CPI market basket have increased on the average.

Question 48

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)100
D)75
E)30

Question 49

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 2011 is

A)100.
B)94.2.
C)106.2.
D)124.
E)140.5.

Question 50

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.

Question 51

If the prices of the goods and services contained in the CPI market basket increase from the base period to the next year,we know that

A)the inflation rate is falling.
B)the next year's CPI will be above 100.
C)the next year's CPI will be below 100.
D)the cost of the CPI market basket at next year's prices is lower than the cost of the CPI market basket at base period prices.
E)the market basket used by the BLS must be changed next year to reflect consumers' new expenditures.

Question 52

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

Question 53

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)$3.50.
C)$52.00.
D)$5.00.
E)$100.

Question 54

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 inflation rate between 2011 and 2012 is

A)52.5 percent.
B)123.1 percent.
C)23.1 percent.
D)18.8 percent.
E)118.8 percent.

Question 55

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 2011 is

A)3.
B)100.
C)160.
D)110.
E)145.

Question 56

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

Question 57

Suppose the CPI for this year is 133.7.This number means that

A)on average,goods cost $133.70 each this year.
B)prices rose 33.7 percent over the last year.
C)prices rose 133.7 percent over the base year.
D)prices rose 33.7 percent over the base year.
E)prices rose 133.7 percent over the last year.

Question 58

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)100.
C)127.
D)350.
E)275.

Question 59

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

Question 60

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.

Question 61

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.

Question 62

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

Question 63

The inflation rate is the

A)percentage change in the composition of the CPI market basket from the base year to the next year.
B)percentage change in the CPI from one year to the next year.
C)difference between the current period CPI and the base period CPI.
D)difference between the base period CPI and the current period CPI.
E)difference in the price level from one year to the next multiplied by 100.

Question 64

When the CPI rises ________,the inflation rate is ________.

A)steadily;zero
B)rapidly;high
C)slowly;high
D)rapidly;low
E)rapidly;either high,low,or zero depending on whether production of output is increasing,decreasing,or not changing.

Question 65

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 2013 is

A)$3,300.
B)$4,885.
C)$4,650.
D)$3,885.
E)None of the above answers is correct.

Question 66

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,between 2013 and 2014,the inflation rate in this country was

A)-1.5 percent.
B)105.1 percent.
C)2.5 percent.
D)98.5 percent.
E)-2.5 percent.

Question 67

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

Question 68

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

Question 69

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.

Question 70

Which of the following formulas is used to calculate the inflation rate?

A)inflation rate = 100 ×
B)inflation rate = 100 ×
C)Inflation rate = 100 ×
D)Inflation rate = 100 ×
E)inflation rate = 100 ×

Question 71

If the CPI is 231.4 in one year and is 241.2 in the next year,then the inflation rate equals

A)(241.2 - 231.4)× 100.
B) × 100.
C) × 100.
D) × 100.
E) × 100.

Question 72

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

Question 73

If the CPI this year is 240 and the CPI in the previous year was 200,what is the annual inflation rate?

A)40.0 percent
B)20.0 percent
C)50 percent
D)16.7 percent.
E)-16.7 percent

Question 74

If the CPI decreases from one year to the next,then the inflation rate is

A)positive.
B)above 100.
C)below 100.
D)negative.
E)0.

Question 75

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)20 percent
C)11.8 percent
D)18 percent
E)15.0 percent

Question 76

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 CPI for 2014 is

A)98.5.
B)105.1.
C)102.5.
D)5.0 percent.
E)100.

Question 77

In the current year,the CPI is 160 and during the previous year the CPI was 181.The inflation rate between these years is

A)11.6 percent.
B)13.1 percent.
C)-11.6 percent.
D)-13.1 percent.
E)-013.1 percent.

Question 78

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 CPI for 2013 is

A)100.
B)98.5.
C)102.5.
D)5.0%.
E)105.1.

Question 79

The inflation rate measures the

A)average price of the goods and services consumed by urban consumers.
B)percentage change in the CPI from one year to the next year.
C)cost of the CPI market basket at current period prices divided by the cost of the CPI market basket at base period prices.
D)percentage change in the quantity of goods and services consumed by urban consumers.
E)cost of the CPI market basket at base period prices divided by the cost of the CPI market basket at current period prices.

Question 80

The inflation rate between last year and this year was 14 percent.The CPI was 118 this year.What was the CPI last year?

A)104.0
B)103.5
C)104.5
D)105.0
E)103.0