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Midterm 2
EC102.B1
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* Mark on your scantron the letter of the choice that best completes the statement or answers the question. Please fill in your ID and NAME
information on the scantron (be sure to write this information in the boxes AND fill in the bubbles.
* Be sure to mark the VERSION of the exam listed in the upper right hand portion of the first page.
* Please write the Name of your TF and the day, time, and section number of your discussion on the top left hand corner of your
scantron. This cannot be bubbled in
* There are 25 questions on the exam and 1 bonus question. The maximum number of points is 25.
* There are 8 pages on the exam, plus one page of scratch paper.
* Please return the test when submitting your scantron.
For the next
three questions
, suppose that the total expenditures for the CPI basket in 2000 equaled $20 per
month, while the cost for the same items in 2005 was $30.
1. If 2000 is the base year, the family's cost of living in 2005,
as compared to 2000:
A. decreased by 50 percent.
B. decreased by 25 percent.
C. increased by 25 percent.
D. increased by 30 percent.
E. None of the above.
2. If 2000 is the base year, the CPI for the year 2005
equals:
A. 0.67
B. 1.50
C. 2
D. 0.50
E. 1.00
3. If 2000 is the base year, the CPI for the year 2000
equals:
A. 0.50
B. 0.67
C. 1.67
D. 1.50
E. 1.00
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4. According with the Boskin Commission, suppose that the CPI does indeed overstate the true rate of inflation
.
When the CPI increases by 10% and household incomes increase by 10%, we should conclude that the real
incomes
of households:
A. increased at the same rate as inflation.
B. stayed constant.
C. decreased.
D. increased.
E. increased more than CPI.
5. When 2000 is the base year
, a CPI that equals 1.34 in 2005 means that:
A. the average level of prices is 34 percent higher in 2005 than in the base year.
B. the CPI basket costs $134 in 2005.
C. the inflation rate in 2005 is 134 percent.
D. the inflation rate in 2005 is 1.34 percent.
E. prices in 2005 are 34 percent higher than in 2004.
6. Making more frequent, but smaller cash withdrawals
from banks _____ the inflation losses from holding
cash and ____ the shoe leather costs of inflation.
A. reduces; reduces
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 Spring '08
 SOFFRITI
 Unemployment, a. b. c., b. c. d., C. D. E., A. B. C. D.

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