24) In order to determine if the quantity of goods and services that an hour’s work can buy
has increased or decreased between 2000 and 2012, one should compare the
A) 2000 nominal wage with the 2012 nominal wage.
B) 2000 real wage with the 2012 nominal wage.
C) 2000 real wage with the 2012 real wage.
D) 2000 nominal wage with the 2012 real wage.
E) 2000 nominal wage with the 2012 nominal wage and the 2000 real wage with the 2012
real wage because both are important factors determining if workers can buy more or
fewer goods with an hour’s work.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
25) A change in the real wage rate measures the change in the
A) price of goods and services that an hour’s work can buy.
B) nominal wage of an hour’s work.
C) quantity of goods and services that an hour’s work can buy.
D) inlation rate afecting the labor market.
E) CPI.
Skill: Level 1: Deinition
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
26) Suppose that residents of France have seen their real wage rate increase over time.
This means that
A) French workers’ inlation rate has increased over time.
B) French workers have increased their average hours of labor over time.
C) French workers have received increases in their nominal wage rate over time.
D) French workers have increased buying power.
E) the CPI must have decreased over time.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
61
27) The change in the quantity of goods and services that an hour’s work can buy is
measured by the
A) nominal wage.
B) real wage.
C) CPI.
D) real interest rate.
E) inlation rate.
Skill: Level 1: Deinition
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
28) When irms decide how much labor to hire, one of the factors that inluences them is
the
A) nominal wage rate plus the inlation rate.
B) nominal wage rate divided by the price level and then multiplied by 100.
C) nominal wage rate minus the inlation rate.
D) real wage rate plus the inlation rate.
E) nominal wage rate divided by the inlation rate and then multiplied by 100.
Skill: Level 1: Deinition
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
29) Which of the following formulas would you use to calculate the nominal wage rate?
A) nominal wage rate = real wage rate ÷ CPI
B) nominal wage rate = real wage rate × CPI
C) nominal wage rate = (real wage rate × CPI) ÷ 100
D) nominal wage rate = (real wage rate × CPI) × 100
E) nominal wage rate = (real wage rate ÷ CPI) × 100
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
62
30) Nominal and real wage rates
A) must always change by the same amount.
B) must always change in opposite directions by the same amount.
C) must always change in the same direction but could change by diferent amounts.
D) could change in opposite directions.
E) must always change in the same direction, and the nominal wage rate must change more
rapidly than the real wage rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
31) In the United States between 1981 and 2012, the
A) nominal wage rate increased more than the real wage rate.
B) real wage rate increased more than the nominal wage rate.
C) nominal and real wage rates increased the same amount.
D) real and the nominal wage rates decreased the same amount.
E) nominal wage rate decreased and the real wage rate increased.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
32) If there is inlation and we compare the changes in a nominal variable over time versus
its real counterpart, such as the nominal wage rate versus the real wage rate, we ind that
the
A) two increase at about the same rate because of inlation.
B) real wage rate increases faster because of inlation.
C) nominal wage rate increases faster because of inlation.
D) two decrease at about the same rate because of inlation.
E) two change at a rate that does not depend on the inlation rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
63
33) Which of the following statements about the nominal and the real wage rates is
correct?
A) The nominal wage rate equals the real wage rate divided by the CPI and then multiplied
by 100.
B) The nominal wage rate is measured in the dollars of a base year.
C) The real wage rate is measured in current year dollars.
D) The real wage rate indicates how many goods and services can be purchased with an
hour’s labor.
E) The real wage rate equals the nominal wage rate multiplied by the CPI then divided by
100.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
34) If the nominal wage is $30 in 2011 and the CPI is 202 in 2011, then the real wage in
1982-1984 dollars
A) is $30.
B) is $14.85.
C) is $1.48.
D) is $29.00.
E) cannot be calculated without the past year wage rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
35) In 2008, Cameron began his career with SBC. His starting salary was $32,000. By
2012, his salary increased to $35,000. If the CPI was 100.0 in 2008 and 107.5 in 2012,
Cameron’s 2012 real income is
A) $32,000.
B) $32,558.
C) $34,400.
D) $37,625.
E) $35,000.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
64
36) Your starting salary is $35,000 per year. After one year, you are given a raise that
increases your nominal salary. Which of the following salaries would you prefer the most?
A) a $36,000 salary with a CPI of 103.0
B) a $38,000 salary with a CPI of 104.0
C) a $39,000 salary with a CPI of 109.0
D) a $39,000 salary with a CPI of 110.0
E) a $37,000 salary with a CPI of 106.0
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
37) If you are earning $20,000 this year and the CPI is 165, your real income in base year
prices is
A) $121.21.
B) $12,121.21.
C) $20,000.
D) $16,500.
E) $33,000.
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
38) If your real income in base year prices is $50,000, then if the CPI is 170, what is your
nominal income?
A) $29,411.76
B) $50,000.00
C) $85,000.00
D) $71,428.57
E) $70,000.00
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
65
39) If your nominal income is $75,000 and your real income in base year prices is $60,000,
what is the CPI?
A) 100
B) 125
C) 80
D) 250
E) 200
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
40) If your nominal income is $80,000 and your real income in base year prices is $71,500,
what is the CPI?
A) 89
B) 100
C) 112
D) 106
E) 150
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
41) Sharisse brags to her mother that her starting salary as a management trainee is
$36,000, much higher than her mother’s starting salary of $21,000 as a management
trainee several years ago. If the CPI the year Sharisse begins work is 181.2 and the CPI the
year her mother started work was 109.1, Sharisse is
A) wrong. Adjusting for price changes, her salary is less than her mother’s salary.
B) wrong. Adjusting for quantity changes, her salary is less than her mother’s salary.
C) correct. Adjusting for price changes, her salary is more than her mother’s salary.
D) correct. Adjusting for quantity changes, her salary is more than her mother’s salary.
E) maybe wrong and maybe right. Adjusting for quantity changes, her salary is less than
her mother’s salary but with the information given we are unable to further adjust for price
changes.
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
66
42) In 2008, the nominal minimum wage rate was $7.25 an hour and the CPI was 200. The
real minimum wage rate in 2008 was
A) $3.63 an hour.
B) $14.50 an hour.
C) $1450 an hour.
D) $26.32 an hour.
E) $7.25 an hour.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
43) In 2012, the nominal wage rate for unionized carpenters was $37.50 and the CPI was
204. Calculate the real wage rate for this group of workers.
A) $37.50
B) $47.09
C) $5.44
D) $18.38
E) $1.84
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
44) Suppose Mack’s wage was $7.00 an hour in 2001 and was $12.00 per hour in 2012. The
CPI was 94 in 2001 and 201 in 2012. The 2001 wage in terms of 2012 dollars is
A) $14.97.
B) $14.07.
C) $3.48.
D) $13.16.
E) $7.00.
Skill: Level 3: Using models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
67
45) Your wage this year is $15 per hour and the CPI is 178. Next year you get a raise to $17
and the CPI rises to 185. What has happened?
A) Your real wage has increased but by a smaller percentage than your nominal wage.
B) Your nominal wage has increased but your real wage has declined.
C) Your real wage rate has increased by a larger percentage than your nominal wage.
D) Your real and nominal wages have each increased by the same percentage.
E) Your nominal wage has increased but your real wage has not changed.
Skill: Level 4: Applying models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
46) If your real income falls during a period of inlation, then your nominal income might
have
A) increased more rapidly than the price level.
B) increased at the same rate as the price level.
C) increased more slowly than the price level.
D) decreased more slowly than the price level.
E) More information is needed to determine if your nominal income increased more slowly,
more rapidly, or at the same rate as the price level.
Skill: Level 4: Applying models
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
47) If you get an 8 percent increase in your nominal income, your real income
A) deinitely increases.
B) increases only if the inlation rate is more than 8 percent.
C) increases only if the inlation rate is equal to 8 percent.
D) increases only if the inlation rate is less than 8 percent.
E) increases if the inlation rate is more than or equal to 8 percent.
Skill: Level 4: Applying models
Section: Checkpoint 7.3
Status: Old
AACSB: Analytical thinking
68
48) If we look at the nominal versus real wage rates paid to Presidents over time, we ind
that
A) George Washington was paid a higher real wage rate than Bill Clinton.
B) George W. Bush is the highest paid according to real wage rates.
C) the real wage rate has steadily increased to $400,000 per year.
D) the nominal wage has increased and decreased at diferent times because of inlation.
E) George W. Bush’s nominal wage is about equal to the average nominal wage paid all
presidents.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Written and oral communication
49) The percentage return on a loan expressed in terms of goods and services is the
A) nominal wage rate.
B) real interest rate.
C) real wage rate.
D) nominal interest rate.
E) CPI interest rate.
Skill: Level 1: Deinition
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
50) The real interest rate equals the
A) nominal interest rate – inlation rate.
B) nominal interest rate + inlation rate.
C) (nominal interest rate ÷ inlation rate).
D) inlation rate – nominal interest rate.
E) (nominal interest rate + inlation rate) × 100.
Skill: Level 1: Deinition
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
69
51) To convert the nominal interest rate to the real interest rate, we
A) divide the nominal interest rate by the inlation rate.
B) multiply the nominal interest rate by the inlation rate.
C) subtract the inlation rate from the nominal interest rate.
D) add the inlation rate to the nominal interest rate.
E) subtract the nominal interest rate from the inlation rate and then multiply by 100.
Skill: Level 1: Deinition
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
52) The real interest rate equals the
A) nominal interest rate multiplied by 100.
B) nominal interest rate divided by 100.
C) nominal interest rate minus the inlation rate.
D) inlation rate minus the nominal interest rate.
E) nominal interest rate divided by the inlation rate and then multiplied by 100.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
53) If the inlation rate is greater than the nominal interest rate, then the
A) real interest rate will be negative.
B) real interest rate will be positive.
C) inlation rate will increase.
D) inlation rate will decrease.
E) nominal interest rate will be negative.
Skill: Level 2: Using deinitions
Section: Checkpoint 7.3
Status: Old
AACSB: Relective thinking
70