Question 1

Scenario 6-1
Grant Smith was a doctor.In 1944,he made $12,000.His daughter,Lisa Smith,is also a doctor.Last year she made $275,000.The price index in 1944 was 17.6 and the price index last year was 200.
-Refer to the Scenario 6-1.What is Lisa's income in 1944 dollars?

Accepted Answer

The answer of Scenario 6-1
Grant Smith was a doctor.In 1944,he...

Question 2

In 1964 in London,Ontario,one could buy a fish and chips for $2.00; today the same fish and chips cost $5.55.Which set of CPIs represents the same purchasing power for the cost in 1964 and the cost today?

Accepted Answer

The answer of In 1964 in London,Ontario,one could buy a...

Question 3

Tiffany is offered a job in Winnipeg that pays $90,000.She is offered a similar job in Montreal for $60,000.Which set of CPIs comes closest to giving both salaries the same purchasing power?

Accepted Answer

The answer of Tiffany is offered a job in Winnipeg...

Question 4

In 1972 in Kelowna,BC,one could buy model rocket engines for $1.50.If those same engines cost $3.00 today,which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

Accepted Answer

To determine the CPI ratio between 1972 and today, we use the formula: (CPI in current year / CPI in base year) x 100. To find the CPI in 1972 and today, we can use the CPI data for Canada provided by Statistics Canada. In 1972, the CPI for Canada was 60. In the most recent month of data available, the CPI for Canada was 135. Therefore, the CPI ratio is (135/60) x 100 = 225. To find the purchasing power of $1.50 in 1972 in today's dollars, we multiply by the CPI ratio: $1.50 x 225 = $337.50. Therefore, $3.00 today has the same purchasing power as $1.50 in 1972, which corresponds to a CPI of 60 in 1972 and 120 today. Therefore, the answer is choice C.

Question 5

The 2015 CPI was 225 and the 1982 CPI was 96.5.How much would you need in 2015 in order to buy what you were able to buy with the $1000 in 1982?

Accepted Answer

To find out how much you would need in 2015 to buy what $1000 could buy in 1982, use the formula: (CPI in 2015 / CPI in 1982) * 1982 amount. This gives (225 / 96.5) * 1000 = $2331.61.

Question 6

In 1969,Don bought a Dodge Dart for $2500.In 2015,he bought a Honda Civic for $22,000.If the price index in 1969 was 39.2 and the price index in 2015 was 190,what is the price of the Dodge Dart in 2015 prices?

Accepted Answer

The answer of In 1969,Don bought a Dodge Dart for...

Question 7

You know that a chocolate bar costs 60 cents today.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in 1962 prices?

Accepted Answer

To compute the price of the candy bar in 1962 prices, we need to adjust the current price by using the inflation rate. The inflation rate can be found by dividing the current CPI by the CPI from 1962. Therefore, we need to divide by today's CPI and multiply by 1962 CPI to get back to 1962 prices. So the correct formula is 60 cents × (1962 CPI / today's CPI).

Question 8

In 1949,the city of Sherbrooke,Quebec,built a hospital for about $500,000.In 1987,the city restored its courthouse for about $2.4 million.A price index for nonresidential construction was 14 in 1949,92 in 1987,and 114.5 in 2015.According to these numbers,what approximately did the hospital cost?

Accepted Answer

The answer of In 1949,the city of Sherbrooke,Quebec,built a hospital...

Question 9

In 1990,Professor Fellswoop made $12,000,in 2000 he earned $24,000,and in 2015 he earned $36,000.If the CPI was 40 in 1990,60 in 2000,and 100 in 2015,then in real terms,when was Professor Fellswoop's salary highest and lowest?

Accepted Answer

The answer of In 1990,Professor Fellswoop made $12,000,in 2000 he...

Question 10

Suppose the average price of gas in 2014 was $0.95 per litre and $0.97 in 2015.The inflation rate was 3 percent in 2015.What was the 2015 price of gas in 2014 dollars?

Accepted Answer

To calculate the 2015 price of gas in 2014 dollars, we first need to adjust the 2015 price for inflation. The inflation rate was 3 percent, so we can calculate the inflation factor as 1 + 0.03 = 1.03. 
Then, we can divide the 2015 price by the inflation factor to get the 2014 price:

$0.97 ÷ 1.03 = $0.942

Therefore, the answer is B.

Question 11

Ingrid takes a job in 1981 at a salary of $10,000.By 2014,she has been promoted,with a salary of $50,000.If the price index in 1981 is 50,and the price index in 2014 is 180,what is Ingrid's 2014 salary in 1981 dollars?

Accepted Answer

To convert Ingrid's 2014 salary to 1981 dollars, use the formula: (2014 salary) * (1981 price index / 2014 price index) = $50,000 * (50 / 180) = $13,889.

Question 12

Scenario 6-1
Grant Smith was a doctor.In 1944,he made $12,000.His daughter,Lisa Smith,is also a doctor.Last year she made $275,000.The price index in 1944 was 17.6 and the price index last year was 200.
-Refer to the Scenario 6-1.What was the approximate ratio of Grant's real income to Lisa's real income?

Accepted Answer

The answer of Scenario 6-1
Grant Smith was a doctor.In 1944,he...

Question 13

Loretta is offered a job in St.John's that pays $50,000.She is also offered a job in Halifax that pays $62 250.Which set of CPIs comes closest to giving both salaries the same purchasing power?

Accepted Answer

To calculate the purchasing power of each salary in terms of the other city's CPI, we divide the salary by the corresponding CPI and then multiply by 100. For the St.John's salary of $50,000, we get a purchasing power of $60,048.05 in Halifax using the CPI of 124.5. For the Halifax salary of $62,250, we get a purchasing power of $50,000 using the CPI of 100 in St.John's. The set of CPIs that come closest to giving both salaries the same purchasing power is therefore 100 in St.John's and 124.5 in Halifax, which is choice C.

Question 14

Andrew is offered a job in Calgary where the CPI is 130 and a job in Toronto where the CPI is 180.Andrew's job offer in Calgary is for $65,000.Which salary would the Toronto job have to pay so that both jobs have the same purchasing power?

Accepted Answer

The answer of Andrew is offered a job in Calgary...

Question 15

When does a cost-of-living allowance (COLA)automatically raise the wage rate?

Accepted Answer

A cost-of-living allowance (COLA) automatically raises the wage rate when the consumer price index (CPI) increases. 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 is used as a basis for adjusting wages, salaries, and pensions to maintain the purchasing power of the consumer's income. Therefore, B is the best choice as it directly relates to the purpose of a COLA. A, C, and D are incorrect as they do not directly relate to the purpose of a COLA.

Question 16

Ethel purchased a bag of groceries in 1970 for $8.She purchased the same bag of groceries in 2015 for $25.If the price index was 38.8 in 1970 and 180 in 2015,what's the price of a 1970 bag of groceries in 2015 prices?

Accepted Answer

The answer of Ethel purchased a bag of groceries in...

Question 17

In 1972 in Sarnia,Ontario,one could buy a bag of chips,a pound of hamburger,a package of buns,and a small bag of charcoal for about $2.50.If the same goods today cost about $6.00,which set of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

Accepted Answer

The answer of In 1972 in Sarnia,Ontario,one could buy a...

Question 18

Scenario 6-1
Grant Smith was a doctor.In 1944,he made $12,000.His daughter,Lisa Smith,is also a doctor.Last year she made $275,000.The price index in 1944 was 17.6 and the price index last year was 200.
-Refer to the Scenario 6-1.What is Grant's 1944 income in last year's dollars?

Accepted Answer

We need to use the formula for adjusting for inflation to find Grant's 1944 income in last year's dollars:
Adjusted Income = (Original Income) x (Price Index Last Year) / (Price Index in 1944)
Adjusted Income = $12,000 x 200 / 17.6
Adjusted Income = $136,363.63
Therefore, the correct answer is D) $136,363.

Question 19

You know that a chocolate bar cost five cents in 1962.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in today's prices?

Accepted Answer

We need to adjust the price of the candy bar in 1962 dollars to today's dollars. This involves multiplying the original price by the ratio of today's CPI to the CPI in 1962. Therefore, the correct formula is 5 cents × (today's CPI / 1962 CPI).

Question 20

Which statement best defines "indexation"?

Accepted Answer

Indexation refers to the use of a law or contract to automatically adjust a dollar amount for the effects of inflation. This is typically done by linking the dollar amount to a specific price index, such as the Consumer Price Index (CPI), so that it increases over time in line with the rate of inflation. This helps to ensure that the purchasing power of the dollar amount remains constant over time.

Quiz 6: Measuring the Cost of Living

Scenario 6-1 Grant Smith was a doctor.In 1944,he made $12,000.His daughter,Lisa Smith,is also a doctor.Last year she made $275,000.The price index in 1944 was 17.6 and the price index last year was 200. -Refer to the Scenario 6-1.What is Lisa's income in 1944 dollars?