Quiz Information for Chapter 11

# Quiz Information for Chapter 11 - Quiz Information for...

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Quiz Information for Chapter 11: Before you take the quiz please review everything given below and make it sure that you know everything and then take the quiz. To find CPI, 1) Fix the Basket 2) Find the prices 3) Compute the baskets cost 4) Choose a base year and compute the index 5) Compute the inflation rate Inflation can be measured by all of the following except the: ___________________ . The CPI will be most influenced by a 10 percent increase in the price of which of the following consumption categories? (Hint; see the pie chart on the page 229 Figure 1). Housing Know calculation of Inflation Rate (Hint: Page 227, Table 1 on Calculating the Consumer Price Index and the Inflation Rate) (CPI2-CPI1)/CPI1=Inflation Rate Which of the following would likely cause the CPI to rise more than the GDP deflator? (Hint: CPI measures the cost of good and services bought by a typical customer and GDP deflator measures the cost of all the good and services produced within the Economy). Know the definition of Consumer Price Index (CPI) Page 226. The consumer price index is a measure of the overall cost of the goods and services bought by a typical consumer If there is an increase in the price of tomatoes that causes consumers to purchase fewer pounds of tomatoes and more pounds of cucumbers the CPI will suffer from: substitution bias . There are six questions on the Sums you have to calculate the value of the basket in base year, calculate the values of the CPI in 2006, 2007 and 2008 respectively, calculate the inflation rate for the given year, calculate the CPI after the Base Year Changed. Do the practice on the Table 1 on the page 227. Refer to your chart to help here Know the Problem of Substitution Bias, Problem of Unmeasured Quality and the Problem of Introduction of New Good very well. Substitution Bias – when the cost of one good goes up, people buy more of a substitutable good. Problem of Unmeasured Quality - Problem of Introduction of New Good – new good is introduced giving consumers more options reducing the cost of maintaining the same level of economic well-being. Reduces cost of living Know the Difference Between The GDP Deflator Versus The Consumer Price Index. Suppose your income rises from \$ 19000 to \$ 31000 while the CPI rises from 122 to 169. Your standard of living has likely:__________________ . Know the calculation of Real Interest Page 236 (Hint: Real Interest Rate = Nominal Interest Rate -

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Inflation Rate) Know to find Nominal Interest Rate.Page 236( Hint: Nominal Interest Rate = Real Interest Rate + Inflation Rate). Last four questions are based on Nominal Interest Rate, Real Interest Rate, Inflation Rate and Expected Inflation Rate. Before you take the Quiz please go through all the questions from the Quiz Information
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## This note was uploaded on 10/22/2011 for the course ACCT 3551 taught by Professor Brown during the Spring '11 term at UNC.

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Quiz Information for Chapter 11 - Quiz Information for...

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