Question 1

The real wage equals the nominal wage ________ the CPI, all times 100.

Accepted Answer

The real wage is calculated by dividing the nominal wage by the Consumer Price Index (CPI) and then multiplying by 100. This adjusts the nominal wage for inflation, providing a measure of the purchasing power of the wage.

Question 2

The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?

Accepted Answer

To find the equivalent salary in 2010 dollars, we need to adjust the 1990 salary for inflation using the CPI. The inflation rate can be calculated as (CPI in 2010 - CPI in 1990) / CPI in 1990 = (218-131)/131 = 0.6641. This means that prices increased by 66.41% between 1990 and 2010. To adjust the salary, we multiply it by the inflation rate and then add it to the original salary: $40,000 * 1.6641 = $66,564. Therefore, the answer is B.

Question 3

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2013, then the value of your grandfather's salary in 2013 dollars is approximately

Accepted Answer

The answer of Suppose your grandfather earned a salary of...

Question 4

You earned $30,000 in 2000, and your salary rose to $80,000 in 2013. If the CPI rose from 82 to 202 between 2000 and 2013, which of the following is true?

Accepted Answer

The answer of You earned $30,000 in 2000, and your...

Question 5

Table 20-14
  The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14. The percentage change in real average earnings from 1965 to 2010 equals

Accepted Answer

To calculate the percentage change in real average earnings, we need to adjust nominal average earnings for inflation using the Consumer Price Index. Real average earnings in 1965 = $2.53/109.6 = $0.0231 (in 2010 dollars). Real average earnings in 2010 = $22.22/218.056 = $0.1019 (in 2010 dollars). Percentage change = (0.1019 - 0.0231)/0.0231 x 100% = 341.95%. However, we need to calculate the percentage change as a difference between 2010 and 1965 real average earnings. Therefore, the percentage change in real average earnings from 1965 to 2010 equals 341.95% - 100% = 241.95%, which is approximately 24.5%. Therefore, the correct answer is C.

Question 6

Table 20-14
  The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14. The real average hourly earnings for 1965 in 1982-1984 dollars equal

Accepted Answer

The answer of Table 20-14
  The table above reports...

Question 7

Table 20-16
 
-Refer to Table 20-16. Looking at the table above, real wages ________ from 2011 to 2012, and real wages ________ from 2012 to 2013.

Accepted Answer

Real wages fell from 2011 to 2012 and rose from 2012 to 2013.

Question 8

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.

Accepted Answer

If your nominal wage rises more slowly than the price level, the purchasing power of your wage has decreased, meaning you can afford fewer goods and services. Therefore, your real wage has fallen. Additionally, if the price level is rising faster than your nominal wage, the purchasing power of a dollar has fallen, meaning it will buy fewer goods and services.

Question 9

List three different price indices and explain how they differ in terms of the market basket on which they are based.

Accepted Answer

The answer of List three different price indices and explain...

Question 10

The producer price index tracks the prices firms receive for goods and services at all stages of production.

Accepted Answer

The producer price index reflects changes in prices received by producers for goods and services at all stages of production, including raw materials, intermediate goods, and finished products.

Question 11

If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years.

Accepted Answer

The percentage change in the CPI is calculated as ((New CPI - Old CPI)/Old CPI) x 100%. Therefore, the percentage change in the CPI between the two years would be ((140-142)/142) x 100% = -1.41%, which is not a 2% fall in prices.

Question 12

Table 20-15
 
-Refer to Table 20-15. Looking at the table above, real average hourly earnings in 2011 were

Accepted Answer

The answer of Table 20-15
 
-Refer to Table 20-15. Looking...

Question 13

Table 20-12
 
-Refer to Table 20-12. Consider a simple economy that produces only three products: burritos, flashlights, and golf balls. Use the information in the table to calculate the inflation rate for 2013, as measured by the consumer price index.

Accepted Answer

The answer of Table 20-12
 
-Refer to Table 20-12. Consider...

Question 14

Table 20-13
 
-Refer to Table 20-13. Consider a simple economy that produces only three products: tacos, earplugs, and toothbrushes. Use the information in the table to calculate the inflation rate for 2013, as measured by the consumer price index.

Accepted Answer

The answer of Table 20-13
 
-Refer to Table 20-13. Consider...

Question 15

Table 20-14
  The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14. The real average hourly earnings for 1965 in 2010 dollars equal

Accepted Answer

The answer of Table 20-14
  The table above reports...

Question 16

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.

Accepted Answer

If nominal wage rises faster than the price level, it means the purchasing power of your income has risen, and therefore your real wage has risen as well.

Question 17

Table 20-17
 
-Refer to Table 20-17. Looking at the table above, real average hourly earnings in 2010 were

Accepted Answer

The answer of Table 20-17
 
-Refer to Table 20-17. Looking...

Question 18

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Accepted Answer

The answer of Why does the substitution bias cause the...

Question 19

Explain how the CPI is constructed.

Accepted Answer

The answer of Explain how the CPI is constructed....

Question 20

Table 20-15
 
-Refer to Table 20-15. Looking at the table above, real average hourly earnings were equal to ________ in 2012.

Accepted Answer

In the row for 2012, under "Real average hourly earnings", the value is $9.52.

Quiz 20: Unemployment and Inflation

The real wage equals the nominal wage ________ the CPI, all times 100.

The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2013, then the value of your grandfather's salary in 2013 dollars is approximately

You earned $30,000 in 2000, and your salary rose to $80,000 in 2013. If the CPI rose from 82 to 202 between 2000 and 2013, which of the following is true?

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The percentage change in real average earnings from 1965 to 2010 equals

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The real average hourly earnings for 1965 in 1982-1984 dollars equal

Table 20-16 -Refer to Table 20-16. Looking at the table above, real wages from 2011 to 2012, and real wages from 2012 to 2013.

If your nominal wage rises more slowly than the price level, we can say your real wage has and the purchasing power of a dollar has .

List three different price indices and explain how they differ in terms of the market basket on which they are based.

The producer price index tracks the prices firms receive for goods and services at all stages of production.

If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years.

Table 20-15 -Refer to Table 20-15. Looking at the table above, real average hourly earnings in 2011 were

Table 20-12 -Refer to Table 20-12. Consider a simple economy that produces only three products: burritos, flashlights, and golf balls. Use the information in the table to calculate the inflation rate for 2013, as measured by the consumer price index.

Table 20-13 -Refer to Table 20-13. Consider a simple economy that produces only three products: tacos, earplugs, and toothbrushes. Use the information in the table to calculate the inflation rate for 2013, as measured by the consumer price index.

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The real average hourly earnings for 1965 in 2010 dollars equal

If your nominal wage rises faster than the price level, we can say your real wage has and the purchasing power of your income has .

Table 20-17 -Refer to Table 20-17. Looking at the table above, real average hourly earnings in 2010 were

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Explain how the CPI is constructed.

Table 20-15 -Refer to Table 20-15. Looking at the table above, real average hourly earnings were equal to ________ in 2012.

Quiz 20: Unemployment and Inflation

The real wage equals the nominal wage ________ the CPI, all times 100.

The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2013, then the value of your grandfather's salary in 2013 dollars is approximately

You earned $30,000 in 2000, and your salary rose to $80,000 in 2013. If the CPI rose from 82 to 202 between 2000 and 2013, which of the following is true?

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The percentage change in real average earnings from 1965 to 2010 equals

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The real average hourly earnings for 1965 in 1982-1984 dollars equal

Table 20-16 -Refer to Table 20-16. Looking at the table above, real wages ________ from 2011 to 2012, and real wages ________ from 2012 to 2013.

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.

List three different price indices and explain how they differ in terms of the market basket on which they are based.

The producer price index tracks the prices firms receive for goods and services at all stages of production.

If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years.

Table 20-15 -Refer to Table 20-15. Looking at the table above, real average hourly earnings in 2011 were

Table 20-12 -Refer to Table 20-12. Consider a simple economy that produces only three products: burritos, flashlights, and golf balls. Use the information in the table to calculate the inflation rate for 2013, as measured by the consumer price index.

Table 20-13 -Refer to Table 20-13. Consider a simple economy that produces only three products: tacos, earplugs, and toothbrushes. Use the information in the table to calculate the inflation rate for 2013, as measured by the consumer price index.

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The real average hourly earnings for 1965 in 2010 dollars equal

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.

Table 20-17 -Refer to Table 20-17. Looking at the table above, real average hourly earnings in 2010 were

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Explain how the CPI is constructed.

Table 20-15 -Refer to Table 20-15. Looking at the table above, real average hourly earnings were equal to ________ in 2012.

Table 20-16 -Refer to Table 20-16. Looking at the table above, real wages from 2011 to 2012, and real wages from 2012 to 2013.

If your nominal wage rises more slowly than the price level, we can say your real wage has and the purchasing power of a dollar has .

If your nominal wage rises faster than the price level, we can say your real wage has and the purchasing power of your income has .