Nominal interest tells you a how fast number of

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quiz 2 - CPI.docx

46 .   Indexation refers to :
a. a process of adjusting the nominal interest rate so that it is equal to the real interest rate .
b. using a law or contract to automatically correct a dollar amount for the effects of inflation .
c. using a price index to deflate dollar values .
d. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator .
Answer:  b.   using a law or contract to automatically correct a dollar amount for the effects of inflation .
47 .   Interest represents a payment
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48 .   Which of the following is the most accurate statement about the relationship between the nominal interest rate and the real interest rate ?
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49 .   Which of the following is the most accurate statement about real and nominal interest rates ?
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50 .   nominal interest tells you ?
a . how fast number of dollars in your bank account rises over time
b. how fast the purchasing power of your bank account rises over time
c. the number of dollars in your bank account today
d . the purchasing power of your bank account today
Answer:  a .   how fast number of dollars in your bank account rises over time
51 .   if increases in the prices of U.S medical care cause the CPI to increase by 2 % , the GDP deflator will likely increase by Select one :
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52 .   Laura bought word - processing software in 2005 for $ 50 . Laura 's twin brother , Laurence , bought an upgrade of the same software in 2006 for $ 50 . To which problem in the construction of the CPI is this situation most relevant ?
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53 .   Suppose that dairy products have risen in price less then prices in general over the last several years , what problem in the construction of the CPI is this most relevant to ?
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54 .   To which of the problems in the construction of the CPI is the invention of pocket - sized computers most relevant ?
a. substitution bias
b. introduction of new goods
c. unmeasured quality change
d . income bias
Answer:  b.   introduction of new goods
2 .   When the consumer price index rises , the typical family
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4 .   The term “ inflation ” is used to describe a situation in which
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7 .   The CPI is a measure of the overall cost of
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11 .   Which goods are supposed to be included in the CPI ?
a. all goods and services produced in the economy
b. all goods and services that typical consumers buy
c. all goods and services in the consumption component of the GDP accounts
d. all the goods , but not the services , in the consumption component of the GDP accounts
Answer:  b.   all goods and services that typical consumers buy
17 .   Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn . What is the consumer price index for 2004 if the base year is 2003 ?
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50. nominal interest tells you ? a. how fast number of dollars in your bank account rises over time b. how fast the purchasing power of your bank account rises over time c.the number of dollars in your bank account today d.the purchasing power of your bank account today
51. if increases in the prices of U.S medical care cause the CPI to increase by 2%, the GDP deflator will likely increase by Select one:
52. Laura bought word-processing software in 2005 for $50. Laura's twin brother, Laurence, bought an upgrade of the same software in 2006 for $50. To which problem in the construction of the CPI is this situation most relevant?
b. unmeasured quality change c. introduction of new goods d. income bias 53. Suppose that dairy products have risen in price less then prices in general over the last several years, what problem in the construction of the CPI is this most relevant to?
54. To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant? a. substitution bias b. introduction of new goods c. unmeasured quality change d. income bias
2. When the consumer price index rises, the typical family
4. The term “inflation” is used to describe a situation in which
7. The CPI is a measure of the overall cost of
11. Which goods are supposed to be included in the CPI? a. all goods and services produced in the economy b. all goods and services that typical consumers buy c. all goods and services in the consumption component of the GDP accounts d. all the goods, but not the services, in the consumption component of the GDP accounts ANSWER: b. all goods and services that typical consumers buy Use the table below to answer the following two questions.
year price of pork price of corn 2003 $20 $20 2004 $20 $30

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