Question 1

The consumer price index measures the cost of:

Accepted Answer

In the computation of the Consumer Price Index, the basket of goods and services is fixed.

Question 2

The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2008, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2009, the price of pizzas increased to $14 each, while the price of jeans and milk remained the same. Between 2008 and 2009, a typical family's cost of living:

Accepted Answer

The market basket cost in 2008 was (10 × $10) + (7 × $40) + (20 × $3) = $440. The same market basket's cost in 2009 was (10 × $14) + (7 × $40) + (20 × $3) = $480, so the consumer price index is 1.091, or an increase of 9.1 percent.

Question 3

Suppose that the total expenditures for a typical household in 2010 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2015 was $3,000. If 2010 is the base year, the CPI for 2010 equals:

Accepted Answer

The base year, by definition, has a CPI value equal to 1.00.

Question 4

The CPI is a measure of the:

Accepted Answer

The consumer price index compares the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year.

Question 5

Who from among the following is counted as employed?

Accepted Answer

Ray is working, so he is considered "employed."

Question 6

If the total expenditures of a typical family equaled $35,000 per year in 2010 and the exact same basket of goods and services cost $40,000 in the year 2015, the family's cost of living:

Accepted Answer

The percentage change in the CPI is computed by taking the current price of the basket divided by the historic price of the basket and then subtracting 1. In this case, ($40,000/$35,000) - 1 = 0.143, or a 14 percent increase.

Question 7

The duration of an unemployment spell is a measure of the:

Accepted Answer

An unemployment spell is a period during which an individual is continuously unemployed.

Question 8

Two groups of workers not counted as unemployed in the official unemployment statistics are ______ workers.

Accepted Answer

Official statistics count discouraged workers as being out-of-the labor force; involuntary part-time workers are counted as employed.

Question 9

Involuntary part-time workers are:

Accepted Answer

Involuntary part-time workers would like to work full-time but cannot find suitable positions. Since they are working, they are considered "employed."

Question 10

Who of the following would be considered a discouraged worker?

Accepted Answer

Frank would be considered a discouraged worker because he has not looked for work in the past 4 weeks.

Question 11

The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 2010, the base year, the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each. In 2015, the typical consumer purchased 15 books for $30 each and 30 hamburgers for $3 each. The consumer price index for 2015 on Planet Econ equals:

Accepted Answer

First, note that in the computation of the CPI, the basket of goods and services is fixed - so the quantities remain the same as in the base year. The market basket cost in 2010 was (10 × $25) + (25 × $2) = $300. The same market basket's cost in 2015 was (10 ×$30) + (25 × $3) = $375, so the consumer price index is 1.25.

Question 12

Susan Clark would like to work forty hours per week, but can only find twenty hours per week of work. In the official employment statistics, Susan is classified as:

Accepted Answer

Although this worker might be considered to be "underemployed," there is no such designation in labor statistics. The designation is "employed" or "unemployed."

Question 13

If the consumer price index increased from 1.52 to 1.65, then it must be the case that ______ relative to prices in the base year.

Accepted Answer

It is typical for some prices to rise and some to fall in the same year, but the consumer price index measures the average price of the entire basket, weighted by the quantity of each item.

Question 14

People who say that they would like to have a job, but have not made an effort to find a job in the past four weeks, are called ______ workers.

Accepted Answer

Discouraged workers are people who say they would like to have a job but have not made an effort to find one in the past four

Question 15

Jim Smith would like to work, but has not looked for work in the past four weeks because he does not believe any jobs are available. In the official employment statistics, Jim is classified as:

Accepted Answer

If a prospective worker has not looked for work in four weeks then that person is considered to be out of the labor force.

Question 16

The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2008, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2009, the price of pizzas went down to $8 each, while the prices of jeans and milk remained the same. Between 2008 and 2009, a typical family's cost of living:

Accepted Answer

The market basket cost in 2008 was (10 × $10) + (7 × $40) + (20 × $3) = $440. The same market basket's cost in 2009 was (10 × $8) + (7 × $40) + (20 × $3) = $420, so the consumer price index is 0.955, or a decrease of 4.5 percent.

Question 17

Involuntary part-time workers are:

Accepted Answer

Involuntary part-time workers would like to work full-time but cannot find suitable positions. Since they are working, they are considered "employed."

Question 18

The consumer price index for the current year measures the cost of a standard basket in the ______ year relative to the cost of the same basket in the ______ year.

Accepted Answer

The consumer price index compares the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year.

Question 19

Suppose that the total expenditures for a typical household in 2010 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2015 was $6,875. If 2010 is the base year, the CPI for the year 2015 equals:

Accepted Answer

CPI is calculated by taking the current price of the basket and dividing it by the historical price of the basket. In this case, $6,875/$5,500 = 1.25.

Question 20

The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the:

Accepted Answer

The consumer price index compares the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year.

Quiz 5: Measuring Economic Activity: GDP, Unemployment, and Inflation

The consumer price index measures the cost of:

Suppose that the total expenditures for a typical household in 2010 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2015 was $3,000. If 2010 is the base year, the CPI for 2010 equals:

The CPI is a measure of the:

Who from among the following is counted as employed?

If the total expenditures of a typical family equaled $35,000 per year in 2010 and the exact same basket of goods and services cost $40,000 in the year 2015, the family's cost of living:

The duration of an unemployment spell is a measure of the:

Two groups of workers not counted as unemployed in the official unemployment statistics are ______ workers.

Involuntary part-time workers are:

Who of the following would be considered a discouraged worker?

Susan Clark would like to work forty hours per week, but can only find twenty hours per week of work. In the official employment statistics, Susan is classified as:

If the consumer price index increased from 1.52 to 1.65, then it must be the case that ______ relative to prices in the base year.

People who say that they would like to have a job, but have not made an effort to find a job in the past four weeks, are called ______ workers.

Jim Smith would like to work, but has not looked for work in the past four weeks because he does not believe any jobs are available. In the official employment statistics, Jim is classified as:

Involuntary part-time workers are:

The consumer price index for the current year measures the cost of a standard basket in the year relative to the cost of the same basket in the year.

Suppose that the total expenditures for a typical household in 2010 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2015 was $6,875. If 2010 is the base year, the CPI for the year 2015 equals:

The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the: