Question 1

Suppose the CPI in 1983 is 100 and the CPI this year is 172. These values for the CPI mean that

Accepted Answer

The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. If the CPI in 1983 is 100 and this year it is 172, it means that the price level has increased by 72% since 1983. Therefore, a good that cost $100 in 1983 would typically cost $172 this year, reflecting the increase in the price level as measured by the CPI.

Question 2

The price of dishwashers has remained relatively constant while the quality of dishwashers has improved. The CPI

Accepted Answer

The Consumer Price Index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households. If the CPI does not adjust for improvements in the quality of goods, such as dishwashers, it can overstate the increase in cost of living by not accounting for the fact that consumers are getting more value for their money. Therefore, if the CPI is not adjusted to take account of higher quality, it has an upward bias.

Question 3

Real GDP is $140 billion and nominal GDP is $180 billion. The GDP deflator equals

Accepted Answer

The GDP deflator is calculated as (Nominal GDP / Real GDP) * 100. Therefore, (180 / 140) * 100 = 128.6.

Question 4

In order to determine if the quantity of goods and services that an hour's work can buy has increased or decreased between 2014 anD₂019, one should compare the

Accepted Answer

Real wages account for inflation and provide a more accurate measure of purchasing power over time.

Question 5

The difference between nominal and real is

Accepted Answer

Nominal values are measured in current dollars, reflecting the current prices at which goods and services are sold. Real values, on the other hand, are adjusted for inflation and measured in the dollars of a specific base year, allowing for comparison over time by accounting for changes in the purchasing power of money.

Question 6

To compare the price of a loaf of bread produced in 1993 with the price of a loaf produced in this year, you should compare the value of the bread in

Accepted Answer

To accurately compare the price of a loaf of bread produced in 1993 with one produced in the current year, it's necessary to adjust for inflation over time. This is done by comparing the prices in real terms, which means adjusting the nominal prices (the prices at which they were actually sold in their respective years) to reflect their value in terms of a base year's purchasing power. This allows for a comparison of the true cost or value of the bread over time, accounting for changes in the general price level and ensuring that the comparison is based on the actual buying power of the money.

Question 7

If the average price of a barrel of oil was $35 in 1990, when the CPI was 114.7 and $55 in 2019 when the CPI was 229.6, then the real cost of a barrel of oil

Accepted Answer

To find the real cost change, adjust the 1990 price for inflation to 2019 dollars: $35 * (229.6 / 114.7) = $70.08. The real cost in 2019 is $55, which is lower than $70.08, indicating a decrease. The percentage decrease is ((70.08 - 55) / 70.08) * 100% ≈ 21.5%, not 57%. However, the closest option indicating a decrease is D.

Question 8

If nominal GDP is $200 billion and the GDP deflator is 120, then real GDP is ________ billion.

Accepted Answer

Real GDP is calculated by dividing nominal GDP by the GDP deflator (then multiplying by 100). So, $200 billion / 1.20 = $166.67 billion, which rounds to $167 billion.

Question 9

In Australia between 1997and 2018, the

Accepted Answer

Between 1997 and 2018 in Australia, the nominal wage rate increased due to inflation and economic growth. However, the real wage rate, which is adjusted for inflation, increased at a slower pace. This means that while workers received higher nominal wages, the purchasing power of these wages did not increase as much due to the rising cost of living.

Question 10

The core inflation rate is

Accepted Answer

Core inflation is typically measured by looking at the CPI (Consumer Price Index) with certain volatile items like food and energy prices excluded to get a clearer view of underlying inflation trends. The trimmed-mean CPI is one method used to calculate core inflation by removing the most extreme movements in prices, hence option C is correct.

Question 11

In 2012, Cameron began his career with HSBC. His starting salary was $32,000. By 2019, his salary had increased to $55,000. If the CPI was 100.0 in 2012 and 117.5 in 2019, Cameron's 2019 real income in 2012 dollars is

Accepted Answer

To calculate Cameron's 2019 real income in 2012 dollars, we use the formula: Real Income = Nominal Income / (CPI in current year / CPI in base year). Plugging in the values: $55,000 / (117.5 / 100) = $55,000 / 1.175 = $46,808.

Question 12

Suppose Mack's wage was $7.00 an hour in 2001 and $12.00 an hour in 2012. The CPI was 94 in 2001 and 201 in 2012. The 2001 hourly wage in terms of 2012 dollars is

Accepted Answer

The answer of Suppose Mack's wage was $7.00 an hour...

Question 13

If the price of jet fuel imported from Russia and used by Qantas suddenly increases, then the CPI will ________ and the GDP deflator will ________.

Accepted Answer

The answer of If the price of jet fuel imported...

Question 14

When we compare the records of the CPI and the chain price index of Household Final Consumption Expenditure (HFCE) over time, the

Accepted Answer

The answer of When we compare the records of the...

Question 15

If the inflation rate is greater than the nominal interest rate, then the

Accepted Answer

The real interest rate is calculated by adjusting the nominal interest rate for inflation. If the inflation rate is higher than the nominal interest rate, the real interest rate becomes negative, indicating that the purchasing power of interest earnings is decreasing.

Question 16

If you get an 8 per cent increase in your nominal income, your real income

Accepted Answer

Real income increases only if the inflation rate is less than the nominal income increase rate, in this case less than 8 per cent, because real income accounts for purchasing power after adjusting for inflation.

Question 17

Which of the following statements about the nominal and real wage rates is correct?

Accepted Answer

The real wage rate reflects the purchasing power of wages, indicating how many goods and services can be purchased with an hour's labor, which is the essence of choice B. Nominal wage is measured in current dollars, not base year dollars, and the real wage rate is adjusted for inflation, not measured in current year dollars. The formulas in C and E for converting between nominal and real wages are incorrect.

Question 18

If your real income in base year prices is $50,000 and the CPI is 170, what is your nominal income?

Accepted Answer

The answer of If your real income in base year...

Question 19

If prices have decreased since the base period, then

Accepted Answer

Real GDP is adjusted for inflation or deflation and reflects the value of all goods and services at constant prices. If prices have decreased since the base period (deflation), real GDP would be larger than nominal GDP because nominal GDP is calculated using current prices, which are lower.

Question 20

A ham and cheese sandwich at the local cafe costs $4.99 in 2005. If the CPI in 2005 was 90.0 and the CPI today is 121.0, the equivalent price for the ham and cheese sandwich today is

Accepted Answer

The equivalent price today can be calculated using the formula: Price Today = (Price in Base Year) * (CPI Today / CPI in Base Year). Substituting the given values: $4.99 * (121.0 / 90.0) = $6.71.

Quiz 7: The Cpi and the Cost of Living

Suppose the CPI in 1983 is 100 and the CPI this year is 172. These values for the CPI mean that

The price of dishwashers has remained relatively constant while the quality of dishwashers has improved. The CPI

Real GDP is $140 billion and nominal GDP is $180 billion. The GDP deflator equals

In order to determine if the quantity of goods and services that an hour's work can buy has increased or decreased between 2014 anD₂019, one should compare the

The difference between nominal and real is

To compare the price of a loaf of bread produced in 1993 with the price of a loaf produced in this year, you should compare the value of the bread in

If the average price of a barrel of oil was $35 in 1990, when the CPI was 114.7 and $55 in 2019 when the CPI was 229.6, then the real cost of a barrel of oil

If nominal GDP is $200 billion and the GDP deflator is 120, then real GDP is ________ billion.

In Australia between 1997and 2018, the

The core inflation rate is

In 2012, Cameron began his career with HSBC. His starting salary was $32,000. By 2019, his salary had increased to $55,000. If the CPI was 100.0 in 2012 and 117.5 in 2019, Cameron's 2019 real income in 2012 dollars is

Suppose Mack's wage was $7.00 an hour in 2001 and $12.00 an hour in 2012. The CPI was 94 in 2001 and 201 in 2012. The 2001 hourly wage in terms of 2012 dollars is

If the price of jet fuel imported from Russia and used by Qantas suddenly increases, then the CPI will and the GDP deflator will .

When we compare the records of the CPI and the chain price index of Household Final Consumption Expenditure (HFCE) over time, the

If the inflation rate is greater than the nominal interest rate, then the

If you get an 8 per cent increase in your nominal income, your real income

Which of the following statements about the nominal and real wage rates is correct?

If your real income in base year prices is $50,000 and the CPI is 170, what is your nominal income?

If prices have decreased since the base period, then

A ham and cheese sandwich at the local cafe costs $4.99 in 2005. If the CPI in 2005 was 90.0 and the CPI today is 121.0, the equivalent price for the ham and cheese sandwich today is

Quiz 7: The Cpi and the Cost of Living

Suppose the CPI in 1983 is 100 and the CPI this year is 172. These values for the CPI mean that

The price of dishwashers has remained relatively constant while the quality of dishwashers has improved. The CPI

Real GDP is $140 billion and nominal GDP is $180 billion. The GDP deflator equals

In order to determine if the quantity of goods and services that an hour's work can buy has increased or decreased between 2014 anD2019, one should compare the

The difference between nominal and real is

To compare the price of a loaf of bread produced in 1993 with the price of a loaf produced in this year, you should compare the value of the bread in

If the average price of a barrel of oil was $35 in 1990, when the CPI was 114.7 and $55 in 2019 when the CPI was 229.6, then the real cost of a barrel of oil

If nominal GDP is $200 billion and the GDP deflator is 120, then real GDP is ________ billion.

In Australia between 1997and 2018, the

The core inflation rate is

In 2012, Cameron began his career with HSBC. His starting salary was $32,000. By 2019, his salary had increased to $55,000. If the CPI was 100.0 in 2012 and 117.5 in 2019, Cameron's 2019 real income in 2012 dollars is

Suppose Mack's wage was $7.00 an hour in 2001 and $12.00 an hour in 2012. The CPI was 94 in 2001 and 201 in 2012. The 2001 hourly wage in terms of 2012 dollars is

If the price of jet fuel imported from Russia and used by Qantas suddenly increases, then the CPI will ________ and the GDP deflator will ________.

When we compare the records of the CPI and the chain price index of Household Final Consumption Expenditure (HFCE) over time, the

If the inflation rate is greater than the nominal interest rate, then the

If you get an 8 per cent increase in your nominal income, your real income

Which of the following statements about the nominal and real wage rates is correct?

If your real income in base year prices is $50,000 and the CPI is 170, what is your nominal income?

If prices have decreased since the base period, then

A ham and cheese sandwich at the local cafe costs $4.99 in 2005. If the CPI in 2005 was 90.0 and the CPI today is 121.0, the equivalent price for the ham and cheese sandwich today is

In order to determine if the quantity of goods and services that an hour's work can buy has increased or decreased between 2014 anD₂019, one should compare the

If the price of jet fuel imported from Russia and used by Qantas suddenly increases, then the CPI will and the GDP deflator will .