31) In 2013, the reference base period for the CPI for the nation of Webot, a typical
consumer spent $30 on potatoes and $150 on steak. If the price of steak is $15 and the
price of potatoes is $1 then there are ________ units of steak and ________ units of potatoes
in the CPI market basket.
A) 30; 150
B) 10; 30
C) 150; 30
D) 5; 30
E) None of the above answers is correct.
Skill: Level 1: Deinition
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
32) Consumers in Beachland consume only two goods, sodas and DVDs. If they spend $10
on sodas and $90 on DVDs a month, how many sodas and DVDs are in their CPI market
basket if the price of a soda is $1 and the price of a DVD is $9?
A) 9 sodas and 1 DVD
B) 1 soda and 9 DVDs
C) 10 sodas and 9 DVDs
D) 10 sodas and 10 DVDs
E) It is impossible to determine the market basket without information on the quantity of at
least one of the two goods consumed.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
33) When the price of, say, a package of rice changes, what must the BLS do next?
A) immediately incorporate the new price into the CPI
B) determine if the new price is consistent with other price changes for the period
C) determine if the size, quality, weight, or packing of the rice has changed and adjust the
price accordingly
D) ignore the price change
E) immediately incorporate the new price into the CPI only if the price has fallen
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Relective thinking
11
34) The formula for the CPI is
A) (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at next
year’s prices) × 100.
B) (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base
period prices) × 100.
C) (Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current
period prices) × 100.
D) (Cost of CPI market basket this year × Cost of CPI market basket at base period prices)
÷ 100.
E) (Cost of CPI market basket this year × Cost of CPI market basket at base period prices)
× 100.
Skill: Level 1: Deinition
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
35) The formula for the CPI is
A) (Cost of CPI market basket at base period prices ÷ Cost of CPI market basket at current
period prices) × 100.
B) (Cost of CPI market basket at current period prices – Cost of CPI market basket at base
period prices) × 100.
C) (Cost of CPI market basket at base period prices – Cost of CPI market basket at current
period prices) × 100.
D) (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base
period prices) × 100.
E) (Cost of CPI market basket at current period prices + Cost of CPI market basket at base
period prices) × 100.
Skill: Level 1: Deinition
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
12
36) Each month the CPI is calculated by
A) recording the new prices and making no other calculation.
B) multiplying the current cost of the CPI market basket by the base period cost and then
dividing by 100.
C) subtracting the base period cost of the CPI market basket from the current cost and
then dividing by 100.
D) dividing the current cost of the CPI market basket by the base period cost and then
multiplying by 100.
E) subtracting the current period cost of the CPI market basket from the base period cost
and then multiplying by 100.
Skill: Level 1: Deinition
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
37) The table above gives the CPI for a nation. Based on the table, we can determine that
the reference base period is
A) 1994.
B) 1996.
C) 1998-2000.
D) 2002.
E) More information about when the Consumer Expenditure Survey was undertaken is
needed to answer the question.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Relective thinking
13
38) If the cost of the CPI market basket at current period prices is $1000 and the cost of
the CPI market basket at base period prices is $250, the CPI is
A) 4.0.
B) 400.
C) 250.
D) 100.
E) 2.50.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
39) To ind the cost of the CPI market basket in the base period prices we have to multiply
the
A) quantities in the CPI market basket by the base period prices.
B) quantities in the CPI market basket by the current period prices.
C) current period quantities in the CPI market basket by the base period prices.
D) current period quantities in the CPI market basket by the current period prices.
E) quantities in the CPI market basket by the base period prices and then multiply by 100.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Relective thinking
40) To ind the cost of the CPI market basket in the current period we have to multiply the
A) quantities in the CPI market basket by the base period prices.
B) quantities in the CPI market basket by the current period prices.
C) current period quantities in the CPI market basket by the base period prices.
D) current period quantities in the CPI market basket by the current period prices.
E) quantities in the CPI market basket by the base period prices and then multiply by 100.
Skill: Level 1: Deinition
Section: Checkpoint 7.1
Status: Old
AACSB: Relective thinking
14
41) When the cost of the CPI market basket increases from one year to the next, we know
that
A) on the average, current prices are less than past year prices.
B) the quantities of the goods and services contained in the CPI market basket have
increased on the average.
C) the prices of the goods and services contained in the CPI market basket have increased
on the average.
D) on the average, current prices are below base year prices.
E) either the quantities of the goods and services contained in the CPI market basket have
increased on the average and/or the prices of the goods and services contained in the CPI
market basket have increased on the average.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
42) If the prices of the goods and services contained in the CPI market basket increase
from the base period to the next year, we know that
A) the inlation rate is falling.
B) the next year’s CPI will be above 100.
C) the next year’s CPI will be below 100.
D) the cost of the CPI market basket at next year’s prices is lower than the cost of the CPI
market basket at base period prices.
E) the market basket used by the BLS must be changed next year to relect consumers‘ new
expenditures.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
43) If the cost of the CPI market basket at current period prices is $275 and the cost of the
CPI market basket at base period prices is $350, the CPI is
A) 79.
B) 100.
C) 127.
D) 350.
E) 275.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
15
44) Suppose the CPI for this year is 133.7. This number means that
A) on average, goods cost $133.70 each this year.
B) prices rose 33.7 percent over the last year.
C) prices rose 133.7 percent over the base year.
D) prices rose 33.7 percent over the base year.
E) prices rose 133.7 percent over the last year.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
45) Suppose that the cost of the CPI basket of goods and services rises from $137 in 2010,
which is the base year, to $159 in 2011. The CPI in 2011 is ________ and the inlation rate
from 2010 to 2011 is ________.
A) 86; 14 percent
B) 86; 22 percent
C) 116; 22 percent
D) 116; 16 percent
E) There is not enough information to answer this question.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: New
AACSB: Analytical thinking
46) Suppose that last year, the price of strawberries was $2 and the price of milk was $1.
This year, the price of milk is $2 and the price of strawberries is $1. Which of the following
statements is true?
A) The CPI does not change because the change in the two prices is the same.
B) The CPI increases because milk is more expensive.
C) The CPI decreases because strawberries are cheaper.
D) The CPI might increase or decrease depending on the quantities in the CPI market
basket.
E) The change in the CPI depends how the market basket changed between the two years.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
16
47) Suppose that the CPI basket contains only 40 heads of caulilower and 60 bunches of
broccoli. If the price of caulilower goes down by $1 per head and the price of broccoli goes
up by $1 per bunch, then
A) the CPI does not change.
B) the CPI increases.
C) the CPI decreases.
D) the CPI might increase or decrease depending how the quantities are afected by the
price changes.
E) There is not enough information to answer this question.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: New
AACSB: Analytical thinking
48) In a small, agricultural nation, consumers buy only steak and potatoes. In 2009, the
base year, the typical consumer spent $potatoes on strawberries and $100 on steak. The
price of potatoes is $1 and the price of steak is $2 in 2009. In 2009, the price of potatoes is
$2 and the price of steak is $1. The CPI for 2010 is
A) 80.
B) 125.
C) 100.
D) 110.
E) 25 percent.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
49) The data in the table above shows the consumption by families in a small (poor)
economy. The families consume only salt and bread. The reference base period is 2011. The
cost of the CPI market basket in 2011 is
A) $64.00.
B) $3.50.
C) $52.00.
D) $5.00.
E) 100.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
50) The data in the table above shows the consumption by families in a small (poor)
economy. The families consume only salt and bread. The reference base period is 2011. The
cost of the CPI market basket in 2010 is
A) $5.00.
17
B) $64.00.
C) $8.50.
D) $52.00.
E) unable to be calculated because information is needed about the quantities purchased in
2010.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
51) The data in the table above shows the consumption by families in a small (poor)
economy. The families consume only salt and bread. The reference base period is 2011. The
CPI in 2011 is
A) 100.
B) 94.2.
C) 106.2.
D) 124.
E) 140.5.
Skill: Level 4: Applying models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
52) The data in the table above shows the consumption by families in a small (poor)
economy. The families consume only salt and bread. The reference base period is 2011. The
CPI in 2012 is
A) 100.
B) 118.8
C) 123.1
D) 23.1
E) 18.8
Skill: Level 4: Applying models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
18
53) The data in the table above shows the consumption by families in a small (poor)
economy. The families consume only salt and bread. The reference base period is 2011. The
inlation rate between 2011 and 2012 is
A) 52.5 percent.
B) 123.1 percent.
C) 23.1 percent.
D) 18.8 percent.
E) 118.8 percent.
Skill: Level 4: Applying models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
54) Consumers in a country buy only two goods, pens and CDs. The prices and quantities
purchased by urban households are in the table above. If 2011 is the reference base year,
the cost of the CPI market basket in the base year is
A) $3,400.
B) $3,408.
C) $3,580.
D) $3,508.
E) $3,500.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
55) Consumers in a country buy only two goods, pens and CDs. The prices and quantities
purchased by urban households are in the table above. The reference base year is 2011. If
the current year is 2012, the cost of the CPI market basket in 2012 is
A) $3,400.
B) $3,588.
C) $3,580.
D) $3,508.
E) $3,500.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
56) Consumers in a country buy only two goods, sneakers and manicures. The prices and
19
quantities purchased by urban households are in the table above. The reference base year
is 2011. For these data, the CPI for 2012 is
A) 145.
B) 100.
C) 160.
D) 10.
E) 110.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
57) Consumers in a country buy only two goods, sneakers and manicures. The prices and
quantities purchased by urban households are in the table above. The reference base year
is 2011. For these data, the CPI for 2011 is
A) 3.
B) 100.
C) 160.
D) 110.
E) 145.
Skill: Level 3: Using models
Section: Checkpoint 7.1
Status: Old
AACSB: Analytical thinking
20