Question 1

You know that the consumer price index (CPI)at the beginning of this year was 250 and the rate of inflation was 14 percent; this would mean the

Accepted Answer

Since the CPI at the beginning of the year was 250 and the inflation rate was 14%, we can calculate the CPI at the end of the year as follows: 250 x (1 + 0.14) = 285. Therefore, choice D is correct. Choices A, B, C, and E are incorrect because they are not supported by the information given in the question.

Question 2

The long-run inflation rate in the United States is about

Accepted Answer

The answer of The long-run inflation rate in the United...

Question 3

If the goods producers buy change dramatically between years,then

Accepted Answer

The GDP deflator is a measure of the price level in the economy, which takes into account the prices of all goods and services produced, including those purchased by producers. Therefore, if the goods producers buy change dramatically between years, it would be reflected in the GDP deflator but not necessarily in the CPI. The CPI, on the other hand, only measures the prices of a fixed basket of goods and services purchased by consumers.

Question 4

Refer to the following figure to answer the following questions: 
-Based on the figure,one could correctly state that

Accepted Answer

The figure shows that the E.U. inflation rate (represented by the blue line) is generally higher than the U.S. inflation rate (represented by the red line), with a few brief exceptions. Therefore, choice B is the correct answer.

Question 5

It is rare when prices fall in modern times.However,it is likely that they would fall during severe recessions.In what year is this most likely to have occurred?

Accepted Answer

The most severe recession in modern times occurred in 2008-2009, with major financial institutions collapsing and a global economic downturn. This would be the most likely year for prices to fall.

Question 6

If people bought the same market basket of goods as the average consumer again and again the

Accepted Answer

If people bought the same market basket of goods as the average consumer again and again, the weights assigned to different goods in the consumer price index (CPI) would accurately reflect the relative importance of those goods in the average consumer's spending. This would result in an extremely accurate CPI.

Question 7

Refer to the following figure to answer the following questions: 
-Based on the figure,one could correctly state that

Accepted Answer

The figure shows that both the United States and the European Union had higher inflation rates in the 1970s and 1980s, but experienced lower inflation rates in the 1990s. Therefore, option D is the correct statement. Options A, B, C, and E are not supported by the information provided in the figure.

Question 8

Michael Chang buys only tennis rackets during a particular year.During the year in question,the price of all goods rises by 10 percent on average,but the price of tennis rackets remains the same.Which statement is correct?

Accepted Answer

Since Michael only buys tennis rackets and their price remains unchanged, he does not experience inflation for his purchases.

Question 9

The percentage change in any economic variable,including the consumer price index (CPI),is measured by which equation?

Accepted Answer

The percentage change in any economic variable is measured by the formula ((Current Year - Previous Year)/ Previous Year) x 100. This formula calculates the change in value as a percentage of the original value. Therefore, option B is the correct formula. Option A has the numerator and denominator reversed, Option C has the denominator as Current Year instead of Previous Year, Option D has the percentage change expressed as an absolute value, and Option E has the numerator and denominator reversed.

Question 10

Refer to the following table to answer the following questions: 
-As presented in the table,the rate of inflation from 1999-2000 was (rounded to two decimal places)

Accepted Answer

To calculate the rate of inflation, we need to find the percentage increase in the CPI from 1999 to 2000.

From the table, we can see that the CPI increased from 80 to 87, which is a difference of 7.

To calculate the percentage increase, we use the formula:

Percentage increase = (Difference ÷ Original value) x 100%

Plugging in the values, we get:

Percentage increase = (7 ÷ 80) x 100%

Percentage increase = 8.75%

Therefore, the rate of inflation from 1999-2000 was 8.75% or choice letter D.

Question 11

Consider a nation in which the price index last year was 130 and this year it is 150.Which statement is correct?

Accepted Answer

The answer of Consider a nation in which the price...

Question 12

In Bovania,milk constitutes 56 percent of the typical basket of goods for a typical consumer.Let's say the price of milk rises by 7 percent and the prices of all other goods fall by 4 percent.Based on the information given,we can definitely say

Accepted Answer

Since milk constitutes a large portion of the typical consumer's basket of goods, a rise in its price will have a significant impact on the overall consumer price index (CPI). Additionally, the fact that other goods are experiencing a price decrease will not be significant enough to counteract the increase in milk prices. Therefore, the CPI in Bovania will likely be greater than in the previous year.

Question 13

Suppose that the consumer price index of a country was 160 at Year 1 and 164 at the end of Year 2.What was the country's inflation rate during Year 2?

Accepted Answer

Inflation rate during Year 2 can be calculated using the formula:

(Inflation rate) = [(CPI at end of Year 2 - CPI at Year 1) / CPI at Year 1] x 100

Substituting the values given in the question:

(Inflation rate) = [(164 - 160) / 160] x 100 = 2.5%

Therefore, the correct answer is B.

Question 14

Refer to the following figure to answer the following questions: 
-As presented in the figure,one could correctly state that during the period shown

Accepted Answer

The statement suggests that neither the United States nor the European Union experienced deflation during the period shown in the figure.

Question 15

Consider a nation in which the price index was 150 last year and this year it is 130.Which statement is correct?

Accepted Answer

Deflation = ((New Price Index - Old Price Index)/Old Price Index) x 100
= ((130-150)/150) x 100
= -20/150 x 100
= -13.33%
Therefore, the correct statement is that deflation was 13.33 percent this year.

Question 16

Refer to the following figure to answer the following questions: 
-As presented in the figure,one could correctly state that

Accepted Answer

The statement suggests that U.S. and E.U. inflation were directly related, meaning they moved in the same direction, and that E.U. inflation was generally higher than U.S. inflation.

Question 17

In terms of inflation,the period from the mid-1980s until today in the United States is called the "Great Moderation." This refers to the fact that

Accepted Answer

The "Great Moderation" refers to the period of reduced volatility in economic output and inflation, with inflation rates being well-controlled and generally below 10 percent, compared to the higher rates of the 1970s and early 1980s.

Question 18

In Nation A,the price index rises from 110 to 120 in a particular year.In the same year,the price level rises from 120 to 130 in Nation B.This means

Accepted Answer

The inflation rate for Nation A is (120-110)/110 x 100% = 9.1%. The inflation rate for Nation B is (130-120)/120 x 100% = 8.3%. Therefore, both nations are experiencing inflation, but it is less than 10%, let alone hyperinflation. Option A is incorrect as it implies that inflation rates are the same for both nations. Option B and C are incorrect as hyperinflation occurs at very high rates of inflation, which is not the case here. Option D is incorrect as Nation A is experiencing inflation, not deflation.

Question 19

Refer to the following table to answer the following questions: 
-As presented in the table,the approximate rate of inflation (or deflation)during 2000-2001 was (rounded to the nearest percent)

Accepted Answer

The table shows that the Consumer Price Index (CPI) increased from 100 in 2000 to 121 in 2001, which means the overall inflation rate during this period was 21%.

Question 20

Which statement best represents the purpose for measuring annual inflation (or deflation)?

Accepted Answer

The purpose of measuring annual inflation (or deflation) is to track changes in the overall cost of living. This allows individuals and government entities to make informed decisions related to economic policies, wages, and expenses. The other answer choices do not reflect the primary purpose of measuring inflation.

Quiz 21: The Price Level and Inflation

You know that the consumer price index (CPI) at the beginning of this year was 250 and the rate of inflation was 14 percent; this would mean the

The long-run inflation rate in the United States is about

If the goods producers buy change dramatically between years,then

Refer to the following figure to answer the following questions: -Based on the figure,one could correctly state that

It is rare when prices fall in modern times.However,it is likely that they would fall during severe recessions.In what year is this most likely to have occurred?

If people bought the same market basket of goods as the average consumer again and again the

Refer to the following figure to answer the following questions: -Based on the figure,one could correctly state that

Michael Chang buys only tennis rackets during a particular year.During the year in question,the price of all goods rises by 10 percent on average,but the price of tennis rackets remains the same.Which statement is correct?

The percentage change in any economic variable,including the consumer price index (CPI) ,is measured by which equation?

Refer to the following table to answer the following questions: -As presented in the table,the rate of inflation from 1999-2000 was (rounded to two decimal places)

Consider a nation in which the price index last year was 130 and this year it is 150.Which statement is correct?

In Bovania,milk constitutes 56 percent of the typical basket of goods for a typical consumer.Let's say the price of milk rises by 7 percent and the prices of all other goods fall by 4 percent.Based on the information given,we can definitely say

Suppose that the consumer price index of a country was 160 at Year 1 and 164 at the end of Year 2.What was the country's inflation rate during Year 2?

Refer to the following figure to answer the following questions: -As presented in the figure,one could correctly state that during the period shown

Consider a nation in which the price index was 150 last year and this year it is 130.Which statement is correct?

Refer to the following figure to answer the following questions: -As presented in the figure,one could correctly state that

In terms of inflation,the period from the mid-1980s until today in the United States is called the "Great Moderation." This refers to the fact that

In Nation A,the price index rises from 110 to 120 in a particular year.In the same year,the price level rises from 120 to 130 in Nation B.This means

Refer to the following table to answer the following questions: -As presented in the table,the approximate rate of inflation (or deflation) during 2000-2001 was (rounded to the nearest percent)

Which statement best represents the purpose for measuring annual inflation (or deflation) ?