Question 1

Refer to the following figure when answering the next questions: 
-In the figure, which of the following changes in the consumer price index (CPI) of Brazil would most closely reflect what is depicted during the 2003-2004 time period?
A) January 2003: 100; July 2003: 118; July 2004: 120
B) January 2003: 200; July 2003: 236; July 2004: 250
C) January 2003: 100; July 2003: 118; July 2004: 200
D) January 2003: 110; July 2003: 120; July 2004: 130
E) January 2003: 100; July 2003: 118; July 2004: 106

Accepted Answer

B

Question 2

Inflation necessarily occurs when:
A) the price of gasoline rises.
B) a greater number of goods increase in price compared to the number of goods that undergo a price decrease.
C) the overall price level, such as the consumer price index (CPI), rises.
D) there is an increase in the rate of change in the price level.
E) the price of at least one good, but possibly more than one good, in the economy increases.

Accepted Answer

Inflation occurs when the overall price level, such as the consumer price index (CPI), rises. While some prices may rise due to various factors, inflation is specifically referring to this overall increase in prices. Therefore, options A, B, D, and E are not necessarily indicative of inflation.

Question 3

The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's, which will always have the value of:
A) 1.
B) 50.
C) 100.
D) 150
E) 229.

Accepted Answer

The base period always has a value of 100 in the CPI calculation, so the answer is Choice C.

Question 4

Typically the consumer price index (CPI) is calculated by:
A) checking the prices of all goods in 38 geographic locations.
B) checking the prices of only consumer goods in all populated places in the United States (using the Census Bureau's definition of a populated place).
C) checking the prices of about 8,000 goods in about 38 locations across the United States.
D) checking the prices of about 8,000 goods in about 38 locations in North America.
E) checking the prices of about 10,000 goods in about 75 locations in the United States.

Accepted Answer

The typical calculation of the consumer price index involves checking the prices of about 8,000 goods in about 38 locations across the United States. This allows for a representative sample of goods and locations to be used in determining the overall inflation rate.

Question 5

Deflation:
A) automatically implies that, on average, everyone is better off because prices have fallen.
B) would negatively affect producers but positively affect consumers because producers must accept lower prices.
C) might easily make both producers and consumers better off because consumers might lose jobs due to falling prices and profit margins, and the falling profit margins would negatively impact producers.
D) might make you better off if your nominal wages fall more rapidly than prices.
E) automatically occurs when there are more goods with falling prices than there are goods with increasing prices.

Accepted Answer

Deflation would negatively affect producers because they would have to accept lower prices, but it could positively affect consumers because prices would be lower. However, this does not mean that everyone is better off on average, and the impact on individual consumers and producers would depend on their specific circumstances. Option A is incorrect because deflation does not automatically imply that everyone is better off. Option C is incorrect because falling profit margins would negatively impact producers, not potentially make them better off. Option D is incorrect because falling nominal wages could also hurt individuals' purchasing power. Option E is incorrect because deflation does not automatically occur when there are more goods with falling prices than with increasing prices.

Question 6

Deflation is best described as:
A) when all prices in the economy fall.
B) when the prices of some goods rise and prices of some goods fall, but more goods have price increases than decreases.
C) when the prices of some goods rise and prices of some goods fall, but fewer goods have price increases than decreases.
D) when the overall level of prices of goods falls.
E) when the overall level of prices of goods rises.

Accepted Answer

Deflation is a decrease in the overall level of prices in an economy. So, option D is the correct choice as it says "when the overall level of prices of goods falls."

Question 7

Education typically composes about:
A) 3% of the CPI
B) 5% of the CPI.
C) 10% of the CPI.
D) 15% of the CPI.
E) 20% of the CPI.

Accepted Answer

The answer of Education typically composes about:
A) 3% of the...

Question 8

From 1960 until 2012, the long-run average rate of inflation in the United States was:
A) less than 1%.
B) about 4%.
C) about 8%.
D) about 12%.
E) negative.

Accepted Answer

The long-run average rate of inflation in the United States for the period of 1960-2012 was approximately 4%, according to data from the Bureau of Labor Statistics.

Question 9

Inflation occurs:
A) when all prices in the economy rise.
B) when the prices of some goods rise and prices of some goods fall, but more goods have price increases than decreases.
C) when the prices of some goods rise and prices of some goods fall, but fewer goods have price increases than decreases.
D) when the overall level of prices rises.
E) when all prices in the economy fall.

Accepted Answer

Inflation occurs when the overall level of prices in the economy rises. This means that the prices of most goods and services are increasing over time, leading to a decrease in the purchasing power of currency. Inflation can be caused by many factors, including an increase in the money supply, a decrease in supply of goods or services, or an increase in demand for goods or services.

Question 10

Inflation in Zimbabwe in 2008:
A) was very low.
B) did not exist; during 2008 Zimbabwe had deflation.
C) was about the same as its neighbors, somewhere around 20%.
D) was very high at the beginning of the year but fell when Robert Mugabe agreed to share power with Morgan Tsvangarai.
E) reached the rate of 80 billion percent per month.

Accepted Answer

Inflation in Zimbabwe in 2008 reached an unprecedented rate of 80 billion percent per month.

Question 11

Refer to the following figure when answering the next questions: 
-Referring to the figure, we can observe that:
A) inflation seemed to stabilize in the early years, 1996-1999, but it then spiked between 2002 and 2004.
B) inflation was always under control in every year shown.
C) there was a relatively constant increase in inflation throughout the entire period shown.
D) inflation tended to fall consistently throughout the entire period shown.
E) there were periods of inflation and deflation depicted in the chart.

Accepted Answer

The graph shows that inflation was relatively stable in the early years (1996-1999), but then spiked between 2002-2004. Therefore, option A is correct. The other options can be eliminated based on the information provided in the graph.

Question 12

If the consumer price index (CPI) was 100 in the period of 1982-1984, then:
A) there would be deflation.
B) this period was the base period.
C) this period was characterized by menu costs.
D) this period was economically optimal.
E) this period was inflationary.

Accepted Answer

The period of 1982-1984 was chosen as the base period for calculating the CPI. The CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, and it uses a base period as a reference point for comparison over time. In this case, the base period is the period when the CPI was 100. Therefore, choice B is the correct answer.

Question 13

The Bureau of Labor Statistics releases consumer price index (CPI) data:
A) hourly.
B) daily.
C) weekly.
D) monthly.
E) only when the typical basket of goods changes.

Accepted Answer

The Bureau of Labor Statistics releases CPI data monthly, typically around the middle of the month. This data is an important indicator of inflation and is used by policymakers and businesses to make decisions regarding prices and wages.

Question 14

Refer to the following figure when answering the next questions: 
-Based on the figure, and if we define inflation as being "under control" at rates less than 10%, when was inflation under control?
A) 1996-2002 only
B) 1997-2003 and 2005-2011
C) 2005-2011 only
D) 1996-1997 only
E) It was never under control.

Accepted Answer

Inflation is under control when the rate is less than 10%. Based on the figure, inflation was under control in the years 1997-2003 and 2005-2011, as the inflation rate remained below 10% during these periods. Therefore, the best choice is B.

Question 15

If the price of a typical market basket of goods increased from about $20 in 1960 to $200 in early 2012, then it:
A) must not have contained the same goods in both periods.
B) rose at a 100% rate from 1960 until early 2012.
C) rose at a 10% rate per year from 1960 until early 2012.
D) rose by 10-fold from 1960 until early 2012.
E) rose by 40-fold from 1960 until early 2012.

Accepted Answer

The price of the market basket increased from $20 to $200, which is a 10-fold increase. Therefore, the correct answer is D. Option A is incorrect because the question mentions that it is a "typical" market basket of goods, implying that the same goods were used in both periods. Option B is incorrect because a 100% increase would mean that the price increased by 200% (or tripled) and not 10-fold. Option C is incorrect because a 10% rate per year would result in a much lower increase over 52 years. Option E is incorrect because a 40-fold increase would be an increase from $20 to $800, not $200.

Question 16

Refer to the following figure when answering the next questions: 
-Based on the figure, which of the following statements best applies?
A) During most years depicted, Brazil experienced hyperinflation.
B) During some years depicted, Brazil experienced inflation; in other years, Brazil experienced deflation.
C) Typically Brazil experienced moderate inflation.
D) During the period shown, Brazil experienced higher and higher inflation with a few exceptions.
E) During the period shown, Brazil went through inflation, but the overall trend was lower and lower inflation with very rare increases.

Accepted Answer

The figure shows that the inflation rate in Brazil remained in single digits for most of the period from 1994 to 2014, with only a few instances where it exceeded 10%. Therefore, it can be concluded that typically Brazil experienced moderate inflation. Option A, B, D, and E can be rejected based on the data shown in the figure.

Question 17

The agency that measures the consumer price index (CPI) in the United States is:
A) the Bureau of Economic Analysis.
B) the Bureau of Labor Statistics.
C) the Economic Adjustment Agency.
D) the Department of Commerce Price Index Office.
E) the Department of Vital Statistics.

Accepted Answer

The Bureau of Labor Statistics (BLS) is the agency responsible for measuring the consumer price index (CPI) in the United States. The BLS is a division of the Department of Labor and provides economic data and analysis to various government agencies, businesses, and individuals.

Question 18

What is the consumer price index (CPI)?
A) The CPI is the measure of consumer prices in both rural and urban areas. It is calculated by adding up all prices.
B) The CPI is a measure of the price level based on the consumption patterns of a typical consumer.
C) The CPI is a measure of all prices in the economy.
D) The CPI is a measure of food prices, because food is what is consumed.
E) The CPI is a measure of food, clothing, and housing prices.

Accepted Answer

The Consumer Price Index (CPI) is a measure of the price level of consumer goods and services in an economy. It is based on the consumption patterns of a typical consumer and includes a wide range of goods and services, such as food, clothing, housing, and transportation. The CPI is used to track inflation over time and is an important economic indicator.

Question 19

Refer to the following figure when answering the next questions: 
-According to the figure, deflation was occurring:
A) between 2003 and 2004.
B) from 1996 until 1999.
C) from 1996 through 1999 and between 2003 and 2004.
D) in none of the years shown.
E) in all of the years shown.

Accepted Answer

The answer of Refer to the following figure when answering...

Question 20

Typically the largest percentage category in the consumer price index (CPI) is:
A) transportation.
B) education.
C) food and beverages.
D) housing.
E) medical care.

Accepted Answer

Housing costs, including rent and mortgage payments, typically make up the largest percentage category in the CPI. This is because housing is a necessity for most individuals and families, and the cost of housing can vary widely across different regions and cities.

Quiz 8: The Price Level and Inflation

Refer to the following figure when answering the next questions: -In the figure, which of the following changes in the consumer price index (CPI) of Brazil would most closely reflect what is depicted during the 2003-2004 time period?

Inflation necessarily occurs when:

The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's, which will always have the value of:

Typically the consumer price index (CPI) is calculated by:

Deflation:

Deflation is best described as:

Education typically composes about:

From 1960 until 2012, the long-run average rate of inflation in the United States was:

Inflation occurs:

Inflation in Zimbabwe in 2008:

Refer to the following figure when answering the next questions: -Referring to the figure, we can observe that:

If the consumer price index (CPI) was 100 in the period of 1982-1984, then:

The Bureau of Labor Statistics releases consumer price index (CPI) data:

Refer to the following figure when answering the next questions: -Based on the figure, and if we define inflation as being "under control" at rates less than 10%, when was inflation under control?

If the price of a typical market basket of goods increased from about $20 in 1960 to $200 in early 2012, then it:

Refer to the following figure when answering the next questions: -Based on the figure, which of the following statements best applies?

The agency that measures the consumer price index (CPI) in the United States is:

What is the consumer price index (CPI) ?

Refer to the following figure when answering the next questions: -According to the figure, deflation was occurring:

Typically the largest percentage category in the consumer price index (CPI) is: