# Consider a nation in which the price index was 150

• Test Prep
• 10
• 71% (7) 5 out of 7 people found this document helpful

This preview shows page 4 - 6 out of 10 pages.

16.Consider a nation in which the price index was 150 last year and this year it is 130. Which statement is correct?a.Inflation was 20% this year.b.Deflation was 20% this year.c.Housing prices must have fallen.d.Inflation was 13.33% this year.e.Deflation was 13.33% this year.
____17.In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means:
____18.Michael Chang buys only tennis rackets during a particular year. During the year in question, the price of all goods rises by 10% on average, but the price of tennis rackets remains the same. Which statement is correct?
Refer to the following figure to answer the questions that follow:
____19.As presented in the figure, one could correctly state that during the period shown:
____20.How do you convert a price of a good from an earlier time into today’s price?a.Take the earlier price and divide by today’s price, then multiply by the ratio of the consumer price index (CPI) today to that of the CPI in the old year.b.Take the earlier price and multiply by the ratio of the earlier gross domestic product (GDP)deflator to today’s CPI.c.Take today’s price and divide by the earlier price in terms of the GDP deflator.d.Take the earlier price and multiply by the ratio of today’s CPI to the earlier CPI.e.Take the earlier price and multiply by the ratio of the earlier CPI to the current CPI.
____
• • • 