Question 1

The textbook shows that the inflation-adjusted movie receipts for Titanic (released in 1997)were $3,205,455,051 in 2015 and the original receipts were $2,186,772,302.The implication is that

Accepted Answer

The fact that the inflation-adjusted movie receipts for Titanic were higher in 2015 than the original receipts in 1997 implies that there has been inflation since 1997. The percentage increase can be calculated as follows:

Inflation rate = (Inflation-adjusted receipts - Original receipts) / Original receipts x 100%
= ($3,205,455,051 - $2,186,772,302) / $2,186,772,302 x 100%
= 46.5%

Therefore, prices were roughly 50% higher in 2015 than they had been in 1997.

Question 2

If your real wage rose but your nominal wage fell,this would imply that

Accepted Answer

The real wage is calculated by dividing the nominal wage by the price level. If the real wage has increased, it means the price level has fallen more than the nominal wage. This indicates deflation.

Question 3

The chained consumer price index (CPI)is a better measure of prices than the traditional CPI because

Accepted Answer

The chained CPI adjusts for price changes more frequently and accounts for the introduction of new goods, which is important as new products often see price reductions shortly after their introduction.

Question 4

The chained consumer price index (CPI)tends to more accurately reflect prices by updating the consumer basket of goods

Accepted Answer

The chained CPI updates the consumer basket of goods on a monthly basis, making it a more accurate reflection of current prices than the traditional CPI, which updates the basket on an annual basis.

Question 5

Three accuracy problems with the consumer price index (CPI)are

Accepted Answer

The CPI faces accuracy issues due to substitution (consumers switching to cheaper alternatives), quality changes (improvements or deteriorations in product quality), and the introduction of new goods and services that are not immediately included in the index.

Question 6

You are offered two jobs,one in Chicago paying $67,000 and one in Dallas paying $58,000.The price index in Chicago is 110.8,and in Dallas it is 91.5.If real wages are the only consideration,then you would

Accepted Answer

To compare real wages, adjust the nominal salaries by the price index: Chicago's real wage is $67,000 / 110.8 = $604.15, and Dallas's real wage is $58,000 / 91.5 = $634.97. The real wage is higher in Dallas.

Question 7

The main drawback of the chained consumer price index (CPI)compared to the traditional CPI is that the chained CPI

Accepted Answer

The chained CPI is more difficult to calculate because it accounts for changes in consumer behavior and substitution between goods, requiring more complex data collection and analysis.

Question 8

Quality changes are

Accepted Answer

Quality changes are at least partially adjusted for in the consumer price index (CPI), which attempts to measure the change in the cost of a fixed basket of goods and services over time. However, it can be difficult to accurately account for all quality improvements, and some adjustments may not be fully reflected in the CPI. Quality changes are also included in the GDP deflator, but the CPI is more commonly used as a measure of inflation for consumers.

Question 9

Let's say a company invents a very popular device called a Zorgon,which allows you to send small items via a transporter from one place to another.This would affect the consumer price index (CPI)in the sense that the CPI

Accepted Answer

The answer of Let's say a company invents a very...

Question 10

Joe Kowalski invents a new product,and this new product becomes cheaper over time.This can be problematic because

Accepted Answer

New products are often not included immediately in the CPI, which can lead to a delay in reflecting price changes in the index.

Question 11

Usually in the United States and other advanced economies

Accepted Answer

In advanced economies, there is typically some level of inflation, which means prices are increasing over time. This means that the purchasing power of each dollar you earn decreases over time. Your nominal wage is the dollar amount that you earn, while your real wage is the purchasing power of that dollar amount. Therefore, in advanced economies, your nominal wage is usually higher than your real wage.

Question 12

The chained consumer price index (CPI)tends to be

Accepted Answer

The answer of The chained consumer price index (CPI)tends to...

Question 13

Inflation is occurring in a nation; the implication(s)of this is/are

Accepted Answer

Inflation causes a decrease in the purchasing power of money. This means that if nominal wages (the amount of money earned) stay the same, the real wage (what that money can buy) would decrease, leading to a fall in real wages.

Question 14

If your nominal wage rises but you think that it automatically means your real wage rose,then you are

Accepted Answer

Money illusion refers to the tendency of individuals to think in nominal rather than real terms. Therefore, if someone assumes that a rise in nominal wage automatically means a rise in real wage (without accounting for inflation), they are suffering from money illusion.

Question 15

In Las Vegas,the cost of living index is 110,and in San Francisco,it is 170.You work in Las Vegas currently and your salary is $57,000.You are offered a promotion and pay raise of $70,000 to move to San Francisco.If you take the promotion

Accepted Answer

To determine the real wage, we need to adjust the nominal wage for the cost of living. The cost of living index in San Francisco is 170, which is higher than in Las Vegas (110). This means that prices of goods and services are 54.5% higher in San Francisco than in Las Vegas (170/110 = 1.545).

To calculate the real wage in San Francisco, we need to divide the nominal wage by the cost of living index and multiply by 100:

Real wage in San Francisco = (Nominal wage in San Francisco / Cost of living index in San Francisco) * 100
Real wage in San Francisco = ($70,000 / 170) * 100
Real wage in San Francisco = $41,176.47

Comparing the real wage in San Francisco to the real wage in Las Vegas ($57,000 / 110 * 100 = $51,818.18), we can see that the real wage has decreased by moving to San Francisco. Therefore, the answer is B: your nominal wage increased but your real wage has decreased.

Question 16

If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI)still assumes they buy the same amount,then

Accepted Answer

If the CPI assumes that consumers are still buying the same amount of cheeseburgers despite the increase in price and the switch to other products, it will overestimate the inflation rate and reflect an upward bias. This is because the CPI is based on a fixed basket of goods and services, and if the prices or quantities of those items change, the index may no longer accurately reflect the cost of living.

Question 17

In a particular nation,people buy a completely unique and different set of goods and services every year.None of the goods purchased in the new year are the same as any of the goods purchased in the previous year.Based on this information

Accepted Answer

The consumer price index (CPI) measures changes in the prices of a fixed basket of goods and services purchased by households, but if the goods purchased are completely unique and different every year, a fixed basket of goods cannot be established, making the CPI meaningless in this nation.

Question 18

According to the textbook,the top-grossing movie of all time (adjusted for inflation)is

Accepted Answer

"Gone with the Wind" is the highest-grossing movie of all time when adjusted for inflation, earning over $3.7 billion at the box office. "Avatar" currently holds the highest unadjusted grossing record, but when accounting for inflation, it falls behind "Gone with the Wind."

Question 19

In Country Z,the prices of goods are measured on an annual basis on the last day of the year.In Country Y,the prices of goods are measured on a weekly basis every Wednesday.Comparing the two countries based on this information,

Accepted Answer

The answer of In Country Z,the prices of goods are...

Question 20

One improvement of the chained consumer price index (CPI)over the traditional CPI is that the

Accepted Answer

The chained CPI more quickly takes into account new goods because it uses a weighted average of the prices of goods in the current period and the previous period. This means that new goods are included in the index more quickly than in the traditional CPI, which uses a fixed basket of goods.

Quiz 21: The Price Level and Inflation

The textbook shows that the inflation-adjusted movie receipts for Titanic (released in 1997) were $3,205,455,051 in 2015 and the original receipts were $2,186,772,302.The implication is that

If your real wage rose but your nominal wage fell,this would imply that

The chained consumer price index (CPI) is a better measure of prices than the traditional CPI because

The chained consumer price index (CPI) tends to more accurately reflect prices by updating the consumer basket of goods

Three accuracy problems with the consumer price index (CPI) are

You are offered two jobs,one in Chicago paying $67,000 and one in Dallas paying $58,000.The price index in Chicago is 110.8,and in Dallas it is 91.5.If real wages are the only consideration,then you would

The main drawback of the chained consumer price index (CPI) compared to the traditional CPI is that the chained CPI

Quality changes are

Let's say a company invents a very popular device called a Zorgon,which allows you to send small items via a transporter from one place to another.This would affect the consumer price index (CPI) in the sense that the CPI

Joe Kowalski invents a new product,and this new product becomes cheaper over time.This can be problematic because

Usually in the United States and other advanced economies

The chained consumer price index (CPI) tends to be

Inflation is occurring in a nation; the implication(s) of this is/are

If your nominal wage rises but you think that it automatically means your real wage rose,then you are

In Las Vegas,the cost of living index is 110,and in San Francisco,it is 170.You work in Las Vegas currently and your salary is $57,000.You are offered a promotion and pay raise of $70,000 to move to San Francisco.If you take the promotion

If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI) still assumes they buy the same amount,then

In a particular nation,people buy a completely unique and different set of goods and services every year.None of the goods purchased in the new year are the same as any of the goods purchased in the previous year.Based on this information

According to the textbook,the top-grossing movie of all time (adjusted for inflation) is

In Country Z,the prices of goods are measured on an annual basis on the last day of the year.In Country Y,the prices of goods are measured on a weekly basis every Wednesday.Comparing the two countries based on this information,

One improvement of the chained consumer price index (CPI) over the traditional CPI is that the