Question 1

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI)increased by 20%.After five years,this family's nominal income ________ and their real income ________.

Accepted Answer

The family's nominal income increased by 15%, but since the CPI increased by 20%, their real income, which accounts for inflation, actually decreased.

Question 2

A year's tuition at an Ontario university cost $250 in 1972,when the consumer price index (CPI)was 21.9.The cost of a year's tuition at the same university cost $3,000 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of tuition

Accepted Answer

To calculate the real cost of tuition, we need to adjust for inflation. We can use the CPI to do this by dividing the current CPI (2000) by the CPI from the base year (1972) and multiplying by the original cost of tuition.

Real cost of tuition in 1972 = $250
Real cost of tuition in 2000 = (250/21.9) x 95.4 = $1,098.63 (rounded to the nearest cent)

Therefore, the real cost of tuition increased from $250 to $1,098.63 between 1972 and 2000, indicating that choice A) increased is the correct answer.

Question 3

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index is called

Accepted Answer

The practice of increasing a nominal quantity (such as wages or pensions) each period by an amount equal to the percentage increase in a specified price index (such as the consumer price index) is called indexing. It helps to maintain the real value of the quantity by adjusting for inflation.

Question 4

The price of a litre of gasoline was $0.12 in 1972,when the consumer price index (CPI)was 21.9.The cost of a litre of gasoline was $0.50 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of a litre of gasoline

Accepted Answer

The real cost of gasoline is adjusted for inflation using the CPI. To compare the real cost, we calculate the price in constant dollars. In 1972 dollars, the 2000 price is $0.50 * (21.9/95.4) = $0.1148, which is less than $0.12, indicating a decrease in the real cost.

Question 5

The wage paid to workers measured in terms of real purchasing power is called the

Accepted Answer

The real wage is the wage paid to workers measured in terms of real purchasing power, meaning it takes into account changes in the cost of living and inflation. The nominal wage (choice A) is the wage paid to workers in current dollars without adjusting for changes in prices over time. The cost of living (choice B) refers to the amount of money needed to maintain a certain standard of living, which can affect the real wage but is not the same thing. The minimum wage (choice C) is a legal floor on wages paid to certain workers, but again is not the same thing as the real wage. Effective wage (choice E) is not a commonly used term in economics and does not accurately describe the concept in question.

Question 6

The consumer price index (CPI)equals 100 in year one and 115 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

Accepted Answer

The answer of The consumer price index (CPI)equals 100 in...

Question 7

A labour contract provides for a first-year wage of $10 per hour,and specifies that the real wage will rise by 3% in the second year of the contract.The consumer price index (CPI)is 100 in the first year and 107 in the second year.What dollar wage must be paid in the second year?

Accepted Answer

To maintain a 3% increase in real wages, the nominal wage must increase by the inflation rate plus the real wage increase. The CPI increase is 7%, so the nominal wage increase is 10% (7% inflation + 3% real increase). Thus, $10 * 1.10 = $11.00. However, to ensure the real wage increase, the calculation should be $10 * (1 + 0.03) * (107/100) = $11.02.

Question 8

Deflating a nominal quantity is the process of dividing a _______ quantity by a ______ in order to express the quantity in ______ terms.

Accepted Answer

Deflating a nominal quantity involves dividing it by a price index in order to express it in real terms. Therefore, the best choice is D, which matches nominal quantity with a price index and expresses the result in real terms. The other options either do not include a price index (A, B, C) or express the result in nominal terms (A, B, E).

Question 9

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI)increased by 15%.After five years,this family's nominal income ________ and their real income ________.

Accepted Answer

The family's nominal income increased by 15%, matching the increase in the CPI, which means their real income, adjusted for inflation, did not change.

Question 10

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI)increased by 12%.After five years,this family's nominal income ________ and their real income ________.

Accepted Answer

15% increase on original income of $28,000 = $4,200 increase
Nominal income after 5 years = $28,000 + $4,200 = $32,200
12% increase in CPI means prices increased by 12%
Adjusted for inflation, real income after 5 years = 1.15/1.12*28,000= $28,929.46
Therefore, nominal income increased by $4,200 and real income increased from $28,000 to $28,929.46, so the correct choice is D, nominal and real income both increased.

Question 11

A labour contract provides for a first-year wage of $15 per hour,and specifies that the real wage will rise by 2% in the second year of the contract.The consumer price index (CPI)is 100 in the first year and 109 in the second year.What dollar wage must be paid in the second year?

Accepted Answer

To calculate the real wage in the second year of the contract, we need to adjust the nominal wage by the percentage change in the CPI.

The percentage change in the CPI is:

(109-100)/100 = 0.09 = 9%

So the real wage in the second year will be:

$15 × (1 + 0.02) / (1 + 0.09) = $15.00 × 1.02 / 1.09 = $14.057

Therefore, the dollar wage that must be paid in the second year is $16.68 per hour (rounded to two decimal places).

The correct answer is D.

Question 12

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI)was 21.9.A college graduate in 2000 found a job paying $30,000,when the CPI was 95.4.The 1972 graduate's job paid ________ in nominal terms and ________ in real terms than the 2000 graduate's job.

Accepted Answer

To find out the real value of the salaries adjusted for inflation we need to use the CPI. We can calculate the real value of each salary using the following formula:

Real Value (in base year dollars) = Nominal Value (in current year dollars) x (Base Year CPI / Current Year CPI)

For the 1972 graduate: 
Real Value = $7,200 x (95.4 / 21.9) = $31,331.05

For the 2000 graduate:
Real Value = $30,000 x (95.4 / 95.4) = $30,000

Therefore, the 1972 graduate's job paid less in nominal terms ($7,200) but more in real terms ($31,331.05) than the 2000 graduate's job. The correct answer is (D) less;more.

Question 13

Indexing is the process of

Accepted Answer

Indexing involves adjusting a nominal quantity by the percentage change in a price index to maintain its purchasing power.

Question 14

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI)was 21.9.A college graduate in 2000 found a job paying $32,000,when the CPI was 95.4.The 1972 graduate's job paid _______ in nominal terms and ______ in real terms than the 2000 graduate's job.

Accepted Answer

The answer of A college graduate in 1972 found a...

Question 15

The consumer price index (CPI)equals 100 in year one and 105 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

Accepted Answer

The nominal wage in year two is calculated by adjusting the year one wage by the percentage increase in the CPI. The CPI increased from 100 to 105, which is a 5% increase. Therefore, the nominal wage in year two will be $15 * 1.05 = $15.75.

Question 16

If the consumer price index (CPI)was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $37,000 in 2007,then between 2002 and 2007,real household income

Accepted Answer

Real household income decreased because the CPI increased by 11.5% (from 100 to 111.5), while the nominal income only increased by about 5.7% (from $35,000 to $37,000), indicating that income did not keep up with inflation.

Question 17

If the consumer price index (CPI)was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $39,025 in 2007,then between 2002 and 2007,real household income

Accepted Answer

The answer of If the consumer price index (CPI)was 100...

Question 18

The real wage is the wage

Accepted Answer

The real wage is the wage measured in terms of purchasing power, meaning it takes into account inflation and the cost of goods and services. It reflects how much a worker can actually afford to buy with their wage.

Question 19

The process of dividing a nominal quantity by a price index in order to express the quantity in real terms is called

Accepted Answer

The process of dividing a nominal quantity by a price index in order to express the quantity in real terms is called deflating. This is because the price index is used to adjust for inflation, and dividing by it "deflates" the nominal quantity to remove the effects of inflation.

Question 20

A factory worker earned $10 an hour in 1985,when the consumer price index (CPI)was 63.0.The same factory worker was earning $15 an hour in 1990,when the CPI was 78.4.From 1985 to 1990,the factory worker's hourly real wage

Accepted Answer

The answer of A factory worker earned $10 an hour...

Quiz 6: Fiscal Policy

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 20%.After five years,this family's nominal income and their real income .

A year's tuition at an Ontario university cost $250 in 1972,when the consumer price index (CPI) was 21.9.The cost of a year's tuition at the same university cost $3,000 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of tuition

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index is called

The price of a litre of gasoline was $0.12 in 1972,when the consumer price index (CPI) was 21.9.The cost of a litre of gasoline was $0.50 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of a litre of gasoline

The wage paid to workers measured in terms of real purchasing power is called the

The consumer price index (CPI) equals 100 in year one and 115 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

A labour contract provides for a first-year wage of $10 per hour,and specifies that the real wage will rise by 3% in the second year of the contract.The consumer price index (CPI) is 100 in the first year and 107 in the second year.What dollar wage must be paid in the second year?

Deflating a nominal quantity is the process of dividing a _ quantity by a in order to express the quantity in __ terms.

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 15%.After five years,this family's nominal income and their real income .

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 12%.After five years,this family's nominal income and their real income .

A labour contract provides for a first-year wage of $15 per hour,and specifies that the real wage will rise by 2% in the second year of the contract.The consumer price index (CPI) is 100 in the first year and 109 in the second year.What dollar wage must be paid in the second year?

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI) was 21.9.A college graduate in 2000 found a job paying $30,000,when the CPI was 95.4.The 1972 graduate's job paid in nominal terms and in real terms than the 2000 graduate's job.

Indexing is the process of

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI) was 21.9.A college graduate in 2000 found a job paying $32,000,when the CPI was 95.4.The 1972 graduate's job paid _ in nominal terms and in real terms than the 2000 graduate's job.

The consumer price index (CPI) equals 100 in year one and 105 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

If the consumer price index (CPI) was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $37,000 in 2007,then between 2002 and 2007,real household income

If the consumer price index (CPI) was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $39,025 in 2007,then between 2002 and 2007,real household income

The real wage is the wage

The process of dividing a nominal quantity by a price index in order to express the quantity in real terms is called

A factory worker earned $10 an hour in 1985,when the consumer price index (CPI) was 63.0.The same factory worker was earning $15 an hour in 1990,when the CPI was 78.4.From 1985 to 1990,the factory worker's hourly real wage

Quiz 6: Fiscal Policy

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 20%.After five years,this family's nominal income ________ and their real income ________.

A year's tuition at an Ontario university cost $250 in 1972,when the consumer price index (CPI) was 21.9.The cost of a year's tuition at the same university cost $3,000 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of tuition

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index is called

The price of a litre of gasoline was $0.12 in 1972,when the consumer price index (CPI) was 21.9.The cost of a litre of gasoline was $0.50 in 2000,when the CPI was 95.4.Between 1972 and 2000,the real cost of a litre of gasoline

The wage paid to workers measured in terms of real purchasing power is called the

The consumer price index (CPI) equals 100 in year one and 115 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

A labour contract provides for a first-year wage of $10 per hour,and specifies that the real wage will rise by 3% in the second year of the contract.The consumer price index (CPI) is 100 in the first year and 107 in the second year.What dollar wage must be paid in the second year?

Deflating a nominal quantity is the process of dividing a _______ quantity by a ______ in order to express the quantity in ______ terms.

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 15%.After five years,this family's nominal income ________ and their real income ________.

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 12%.After five years,this family's nominal income ________ and their real income ________.

A labour contract provides for a first-year wage of $15 per hour,and specifies that the real wage will rise by 2% in the second year of the contract.The consumer price index (CPI) is 100 in the first year and 109 in the second year.What dollar wage must be paid in the second year?

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI) was 21.9.A college graduate in 2000 found a job paying $30,000,when the CPI was 95.4.The 1972 graduate's job paid ________ in nominal terms and ________ in real terms than the 2000 graduate's job.

Indexing is the process of

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI) was 21.9.A college graduate in 2000 found a job paying $32,000,when the CPI was 95.4.The 1972 graduate's job paid _______ in nominal terms and ______ in real terms than the 2000 graduate's job.

The consumer price index (CPI) equals 100 in year one and 105 in year two.If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI,what will be the nominal wage in year two?

If the consumer price index (CPI) was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $37,000 in 2007,then between 2002 and 2007,real household income

If the consumer price index (CPI) was 100 in 2002 and 111.5 in 2007,and a typical household's income was $35,000 in 2002 and $39,025 in 2007,then between 2002 and 2007,real household income

The real wage is the wage

The process of dividing a nominal quantity by a price index in order to express the quantity in real terms is called

A factory worker earned $10 an hour in 1985,when the consumer price index (CPI) was 63.0.The same factory worker was earning $15 an hour in 1990,when the CPI was 78.4.From 1985 to 1990,the factory worker's hourly real wage

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 20%.After five years,this family's nominal income and their real income .

Deflating a nominal quantity is the process of dividing a _ quantity by a in order to express the quantity in __ terms.

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 15%.After five years,this family's nominal income and their real income .

One family earned an income of $28,000 in 2000.Over the next five years,their income increased by 15%,while the consumer price index (CPI) increased by 12%.After five years,this family's nominal income and their real income .

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI) was 21.9.A college graduate in 2000 found a job paying $30,000,when the CPI was 95.4.The 1972 graduate's job paid in nominal terms and in real terms than the 2000 graduate's job.

A college graduate in 1972 found a job paying $7,200,when the consumer price index (CPI) was 21.9.A college graduate in 2000 found a job paying $32,000,when the CPI was 95.4.The 1972 graduate's job paid _ in nominal terms and in real terms than the 2000 graduate's job.