Question 1

The GDP deflator is not a fixed-quantity price index, but the CPI is. What is the significance of this fact?

Accepted Answer

The fact that the GDP deflator reflects changes in consumption patterns as consumers substitute between goods means that it is not a fixed-quantity price index. In contrast, the CPI is a fixed-quantity price index, which means that it does not account for changes in consumption patterns. This is significant because it means that the GDP deflator may provide a more accurate measure of inflation, since it reflects changes in both prices and consumption patterns. However, it also makes it more difficult to compare inflation across different time periods because the composition of goods and services in the market basket may change over time.

Question 2

-In the table shown above, the total cost of the market basket in 2015 was

Accepted Answer

The answer of 
-In the table shown above, the total...

Question 3

-In the table shown above, the total cost of the market basket in 2010 was

Accepted Answer

The total cost of the market basket in 2010 is calculated by multiplying the quantity of each item in the market basket by its price in 2010 and then summing these products. Without the specific details of the table, it's impossible to calculate the exact total, but based on the provided options, $60.00 seems like a plausible total cost for a market basket, assuming it contains multiple items.

Question 4

The purchasing power of the dollar

Accepted Answer

The purchasing power of the dollar is the amount of goods and services that can be purchased with it. Option A is incorrect because as prices increase, the purchasing power of the dollar decreases. Option C is incorrect because there have been periods where the purchasing power of the dollar has decreased. Option D is incorrect because the purchasing power of the dollar has fluctuated over the last 20 years.

Question 5

How has the pattern of movements in the U.S. price level changed since World War II?

Accepted Answer

Since World War II, the U.S. has largely avoided periods of deflation, focusing instead on managing inflation through monetary policy. While there have been fluctuations in the inflation rate, including periods above 3 percent, outright deflation has been rare, indicating a significant change in economic management and policy effectiveness.

Question 6

Which government agency compiles the consumer price index?

Accepted Answer

The Bureau of Labor Statistics compiles the consumer price index.

Question 7

In the United States, most often the ________ changes first, and the ________ follows.

Accepted Answer

The producer price index (PPI) typically changes first, as it is an early indicator of price changes at the producer level. The consumer price index (CPI) tends to follow later as these price changes filter through to consumers.

Question 8

If 2010 is the base year in the table shown above, what is the price index for the year 2015?

Accepted Answer

The answer of If 2010 is the base year in...

Question 9

If 2010 is the base year in the table shown above, what is the price index for the year 2010?

Accepted Answer

The price index for the base year is always 100.0, as it is the year of reference for calculating the index.

Question 10

You receive a 5 percent raise in your salary. The inflation rate is 6 percent. The purchasing power of your salary has

Accepted Answer

Even though the salary increased by 5%, the inflation rate of 6% means that prices for goods and services have also increased. This means that the purchasing power of the salary has decreased by the difference between the two, which is 1%. Therefore, the correct choice is B, which indicates that the purchasing power has decreased by 1%.

Question 11

You receive a five percent raise in your hourly wage. The inflation rate is four percent. Your purchasing power has

Accepted Answer

With a five percent raise in hourly wage and a four percent inflation rate, the purchasing power increases by one percent. Therefore, the answer is A, increased.

Question 12

Considering the data from the table shown above, assuming that the market basket cost of light bulbs and volleyballs in the base year was $4500, what would be the price index for the year 2015?

Accepted Answer

The price index is calculated by dividing the cost of the market basket in the current year by the cost in the base year and then multiplying by 100. If the cost in 2015 is $8000, the index is (8000/4500)*100 = 177.78.

Question 13

Which is the broadest price index reported in the United States?

Accepted Answer

The GDP deflator is the broadest price index reported in the United States. It measures changes in the prices of all goods and services produced in the economy, not just those purchased by consumers (like the CPI-U) or those produced by businesses (like the PPI).

Question 14

The market basket cost $300 in 2015, while it cost $250 in the base year. Therefore, the price index for 2015 is

Accepted Answer

To calculate the price index, we use the formula:
Price index = (cost of market basket in a given year / cost of market basket in base year) x 100

Price index for 2015 = (300 / 250) x 100 = 120

Therefore, the price index for 2015 is 120.

Question 15

Considering the data in the table shown above and 2010 as the base year, what is the inflation rate between years 2010 and 2015?

Accepted Answer

To calculate the inflation rate, we need to use the following formula: 
Inflation rate = ((CPI in current year - CPI in base year) / CPI in base year) x 100

Using the data in the table, we find: 
CPI in 2010 = 100
CPI in 2015 = 141.7

Inflation rate = ((141.7 - 100) / 100) x 100 = 41.7%

Therefore, the answer is B, 41.7 percent.

Question 16

The term "market basket" means a

Accepted Answer

The term "market basket" refers to a collection of goods and services that is used to track price changes and inflation, typically representing what is consumed by a typical family or household over a certain period.

Question 17

The government agency which has been given the task of calculating the Consumer Price Index (CPI)is

Accepted Answer

The Bureau of Labor Statistics is the government agency tasked with calculating the Consumer Price Index (CPI).

Question 18

The price index for any designated base year must always equal

Accepted Answer

The price index for any designated base year must always be equal to 100 to represent the benchmark price level for that year. This is because a price index is a measure of the relative change in prices over time, and using 100 as the base year value allows for easy comparison and analysis of price changes.

Question 19

In 2015, the price for a market basket of consumer goods is $1,600. In the base year, the cost of the identical market basket was $1,000. The price index in this case is

Accepted Answer

The price index is calculated by dividing the current year price by the base year price and then multiplying by 100. So, ($1,600 / $1,000) * 100 = 160.0.

Question 20

A Two-Good Market
 
-In the table shown above, assuming that the market basket cost of light bulbs and volleyballs in the base year was $4500, what would the price index for this two-good market equal in the year 2010?

Accepted Answer

The answer of A Two-Good Market
 
-In the table shown...

Quiz 7: The Macroeconomy: Unemployment, Inflation, and Deflation