Question 1

Suppose that the market basket for the university student price index (USPI) consists of 4 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas costs $1 per gallon. In 2011, textbooks still cost $50 each and gasoline costs $4 per gallon. The USPI for 2011 is:

Accepted Answer

To calculate the USPI for 2011, we need to first calculate the cost of the market basket in both years.

In 2010, the cost of the market basket was:

4 textbooks * $50 per textbook = $200 for textbooks
100 gallons of gasoline * $1 per gallon = $100 for gas
Total cost of market basket = $200 + $100 = $300

In 2011, the cost of the market basket was:

4 textbooks * $50 per textbook = $200 for textbooks
100 gallons of gasoline * $4 per gallon = $400 for gas
Total cost of market basket = $200 + $400 = $600

To calculate the USPI, we divide the cost of the market basket in 2011 by the cost of the market basket in the base year (2010) and multiply by 100:

(600 / 300) * 100 = 200

Therefore, the USPI for 2011 is 200. The correct answer is B.

Question 2

If the cost of a market basket is $150 in year 1 and $200 in year 2, the price index for year 1 using year 2 as the base is:

Accepted Answer

The price index is calculated as (Cost in Year 1 / Cost in Year 2) * 100 = ($150 / $200) * 100 = 75.

Question 3

The inflation or deflation rate is:

Accepted Answer

The inflation or deflation rate is the percentage change in a price index, which is calculated by dividing the change in the index by the initial value of the index. This is represented by the formula [(new index value - old index value) / old index value] x 100. Option A accurately defines this concept.

Question 4

Use the following to answer questions:
Scenario: Price Index
Suppose that in the base period a college student buys 20 gallons of gasoline at $2 per gallon, 2 CDs for $13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50.
-In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and $160 in 2011. Based on this information and considering 2009 to be the base year, the price index in 2011 was:

Accepted Answer

To calculate the price index, we use the following formula:

Price index = (total cost of market basket in current year / total cost of market basket in base year) x 100

Using the information given, we can calculate the total cost of the market basket in each year:

In 2009: 20 x $2 + 2 x $13 + 4 x $7 = $94
In 2010: 20 x $2.25 + 2 x $12.5 + 4 x $7 = $104
In 2011: 20 x $2.50 + 2 x $12.5 + 4 x $7.5 = $120

Using the formula above, we can calculate the price index for 2010:

Price index for 2010 = ($104 / $94) x 100 = 110.64

And for 2011:

Price index for 2011 = ($120 / $94) x 100 = 127.66

Therefore, the price index in 2011 was 123.07, which is closest to answer choice C (123.07).

Question 5

Use the following to answer questions :
Table: Pizza Economy III
 
-(Table: Pizza Economy III) Look at the table Pizza Economy III. Using 2010 as the base year, nominal GDP in 2010 was:

Accepted Answer

The answer of Use the following to answer questions :
Table:...

Question 6

Use the following to answer questions:
Scenario: Price Index
Suppose that in the base period a college student buys 20 gallons of gasoline at $2 per gallon, 2 CDs for $13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50.
-(Scenario: Price Index) Look at the scenario Price Index. The price index for the second month is:

Accepted Answer

To calculate the price index, first find the cost of the basket in the base period and the second month. Base period cost: (20*$2) + (2*$13) + (4*$7) = $40 + $26 + $28 = $94. Second month cost: (20*$2.25) + (2*$12.50) + (4*$7.50) = $45 + $25 + $30 = $100. Price index = (Second month cost / Base period cost) * 100 = ($100 / $94) * 100 = 106.4.

Question 7

The aggregate price level is the:

Accepted Answer

The aggregate price level is the overall level of prices in the economy. It includes the prices of goods and services, as well as the prices of assets such as stocks and real estate. It is measured by indicators such as the Consumer Price Index (CPI) and the Producer Price Index (PPI). It is not the same as the average price of shares on the stock market or the average price of gasoline, although both of these values can be included in the calculation of the aggregate price level if they are relevant.

Question 8

If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as the base is:

Accepted Answer

The formula for calculating price index using year 1 as the base is: 
(price of market basket in year 2 / price of market basket in year 1) x 100 
= (230/200) x 100 
= 1.15 x 100 
= 115 
Therefore, the price index for year 2 using year 1 as the base is 115.

Question 9

Use the following to answer questions : 
-(Table: Market Basket of School Supplies) Look at the table market Basket of School Supplies. It shows the prices of three common school supplies in 2010 and 2011 and the quantities of each school supply that consumers bought in 2010, the base year. A school supply index to measure the rate at which average school supply prices have changed would show an inflation rate of:

Accepted Answer

The inflation rate is calculated as the percentage change in the average price of a basket of goods and services over time. In this case, the average price of the basket of school supplies increased from $10 in 2010 to $12.20 in 2011, an increase of 22%.

Question 10

Use the following to answer questions:
Scenario: Price Index
Suppose that in the base period a college student buys 20 gallons of gasoline at $2 per gallon, 2 CDs for $13 each, and 4 movie tickets for $7 each. In the next month, the price of gasoline is $2.25 per gallon, CDs cost $12.50 each, and the price of a movie ticket is $7.50.
-(Scenario: Price Index) Look at the scenario Price Index. The change in prices from the first to the second month is:

Accepted Answer

To find the change in prices we need to calculate the price index.

Price index in the base period = (20 x $2) + (2 x $13) + (4 x $7) = $84

Price index in the second month = (20 x $2.25) + (2 x $12.50) + (4 x $7.50) = $93

Change in price index = ($93 - $84) / $84 x 100% = 6.4%

Therefore, the answer is C.

Question 11

Use the following to answer questions :
Table: Pizza Economy III
 
-(Table: Pizza Economy III) Look at the table Pizza Economy III. Using 2010 as the base year, real GDP in 2010 was:

Accepted Answer

The answer of Use the following to answer questions :
Table:...

Question 12

A price index:

Accepted Answer

A price index always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.

Question 13

Inflation can be measured by the:

Accepted Answer

Inflation is typically measured by the percentage change in the consumer price index (CPI), which tracks the price changes of a basket of goods and services typically consumed by households. The CPI is considered a reliable indicator of inflation as it measures the changes in the cost of living for consumers.

Question 14

If the consumer price index is 120 in year 1 and 150 in year 2, then the rate of inflation from year 1 to year 2 is:

Accepted Answer

The formula to calculate the inflation rate is:

Inflation rate = ((CPI in year 2 - CPI in year 1) / CPI in year 1) x 100%

In this case, the CPI in year 1 is 120 and the CPI in year 2 is 150. So,

Inflation rate = ((150-120) / 120) x 100% = 0.25 x 100% = 25%

Therefore, the answer is choice C, 25%.

Question 15

In a market basket of goods:

Accepted Answer

In a market basket of goods, the items or quantities stay constant, while the prices may change regularly. The purpose of a market basket analysis is to monitor the cost of goods and to compare the changes holistically.

Question 16

Inflation is a(n):

Accepted Answer

Inflation refers to a sustained and general rise in the price level of goods and services in an economy, which means that aggregate (overall) price levels are rising. B, C, and D are not related to inflation.

Question 17

Suppose that the market basket for the university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas cost $1 per gallon. In 2011, textbooks cost $80 each and gasoline cost $3 per gallon. The USPI for 2011 is:

Accepted Answer

First, we need to find the total cost of the basket in the base year (2010):
5 textbooks x $50 each = $250
100 gallons of gas x $1 per gallon = $100
Total cost of basket in 2010 = $250 + $100 = $350

Next, we need to find the total cost of the basket in 2011:
5 textbooks x $80 each = $400
100 gallons of gas x $3 per gallon = $300
Total cost of basket in 2011 = $400 + $300 = $700

To calculate the USPI, we use the following formula:

USPI = (total cost of basket in year t / total cost of basket in base year) x 100

USPI for 2011 = ($700 / $350) x 100 = 200

Therefore, the USPI for 2011 is 200.

Question 18

In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and $160 in 2011. Based on this information and considering 2009 as the base year, inflation from 2009 to 2011 was:

Accepted Answer

Inflation from 2009 to 2011 is calculated as ((160 - 130) / 130) * 100 = 23.07%.

Question 19

Use the following to answer questions :
Table: The Consumer Price Index 
-(Table: The Consumer Price Index) Look at the table The Consumer Price Index. The approximate rate of inflation in year 3 is:

Accepted Answer

The answer of Use the following to answer questions :
Table:...

Question 20

Use the following to answer questions : 
-(Table: Market Basket of School Supplies) Look at the table market Basket of School Supplies. It shows the prices of three common school supplies in 2010 and 2011 and the quantities of each school supply that consumers bought in 2010, the base year. A school supply index for 2011 would be:

Accepted Answer

To calculate the school supply index for 2011, we need to find the total cost of school supplies in 2010 (base year) and the total cost of school supplies in 2011.

Total cost in 2010: 
(Price of pens x quantity of pens) + (Price of notebooks x quantity of notebooks) + (Price of folders x quantity of folders) 
= (0.50 x 500) + (1.00 x 200) + (0.20 x 1000) 
= $450

Total cost in 2011: 
(Price of pens x quantity of pens) + (Price of notebooks x quantity of notebooks) + (Price of folders x quantity of folders) 
= (0.60 x 600) + (1.20 x 150) + (0.25 x 800) 
= $660

To calculate the school supply index for 2011, we need to divide the total cost in 2011 by the total cost in 2010 and multiply by 100.

School supply index = (Total cost in 2011 / Total cost in 2010) x 100 
= ($660 / $450) x 100 
= 122.2

Therefore, the best choice is C.

Quiz 7: Gdp and Cpi: Tracking the Macroeconomy

If the cost of a market basket is $150 in year 1 and $200 in year 2, the price index for year 1 using year 2 as the base is:

The inflation or deflation rate is:

Use the following to answer questions : Table: Pizza Economy III -(Table: Pizza Economy III) Look at the table Pizza Economy III. Using 2010 as the base year, nominal GDP in 2010 was:

The aggregate price level is the:

If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as the base is:

Use the following to answer questions : Table: Pizza Economy III -(Table: Pizza Economy III) Look at the table Pizza Economy III. Using 2010 as the base year, real GDP in 2010 was:

A price index:

Inflation can be measured by the:

If the consumer price index is 120 in year 1 and 150 in year 2, then the rate of inflation from year 1 to year 2 is:

In a market basket of goods:

Inflation is a(n) :

In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and $160 in 2011. Based on this information and considering 2009 as the base year, inflation from 2009 to 2011 was:

Use the following to answer questions : Table: The Consumer Price Index -(Table: The Consumer Price Index) Look at the table The Consumer Price Index. The approximate rate of inflation in year 3 is: