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1. The CPI is a measure of the overall cost of
a.
the inputs purchased by a typical producer.
b.
the goods and services purchased by a typical consumer.
c.
the goods and services produced in the economy.
d.
the stocks on the New York Stock Exchange.
2. The CPI is a measure of the overall cost of the goods and services bought by
a.
a typical firm.
b.
the government.
c.
a typical consumer.
d.
All of the above are correct.
3. The CPI is a measure of the overall cost of the goods and services bought by
a.
a typical consumer, and the CPI is computed and reported by the Department of the Treasury.
b.
typical consumers and typical business firms, and the CPI is computed and reported by the Department of the
Treasury.
c.
a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics.
d.
typical consumers and typical business firms, and the CPI is computed and reported by the Bureau of Labor
Statistics.
4. Which of the following agencies calculates the CPI?
a.
the National Price Board
b.
the Department Of Weight and Measurements
c.
the Bureau of Labor Statistics
d.
the Congressional Budget Office
5. Which entity within the U.S. government is responsible for computing and reporting the CPI?
a.
the Department of Commerce
b.
the Department of Labor
c.
the General Accounting Office
d.
the Council of Economic Advisers
6. The CPI is calculated
a.
monthly by the Department of Commerce.
b.
monthly by the Bureau of Labor Statistics.
c.
quarterly by the Department of Commerce.
d.
quarterly by the Bureau of Labor Statistics.
7. Which of the following agencies calculates the CPI?
a.
Bureau of Labor Statistics
b.
Congressional Budget Office
c.
Federal Reserve
d.
Bureau of National Price Standards and Records
8. Reports on the current consumer price index are released every
a.
quarter.
b.
two weeks.
c.
month.
d.
week.
9. The CPI is calculated
a.
weekly.
b.
monthly.
c.
quarterly.
d.
yearly.
10. The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:
a.
Choose a base year, update the basket, find the prices, estimate the basket’s cost, compute the index, and
compute the inflation rate.
b.
Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and
compute the index.
c.
Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and
compute the inflation rate.
d.
Fix the basket, find the prices, compute the inflation rate, compute the basket’s cost, and choose a base year
and compute the index.
11. In the CPI, goods and services are weighted according to
a.
how long a market has existed for each good or service.
b.
the extent to which each good or service is regarded by the government as a necessity.
c.
how much consumers buy of each good or service.
d.
the number of firms that produce and sell each good or service.
12. In the calculation of the CPI, books are given greater weight than magazines if
a.
consumers buy more books than magazines.
b.
the price of books is higher than the price of magazines.
c.
it costs more to produce books than it costs to produce magazines.
d.
books are more readily available than magazines to the typical consumer.
13. In the calculation of the CPI, tea is given greater weight than beer if
a.
the price of tea is higher than the price of beer.
b.
it costs more to produce tea than it costs to produce beer.
c.
tea is more readily available than beer to the typical consumer.
d.
consumers buy more tea than beer.
14. In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the
fixed basket are determined by
a.
surveying consumers.
b.
surveying sellers of the goods and services.
c.
working backward from the rate of inflation to arrive at imputed values for those quantities.
d.
arbitrary choices made by federal government employees.
15. What basket of goods and services is used to construct the CPI?
a.
a random sample of all goods and services produced in the economy
b.
the goods and services that are typically bought by consumers as determined by government surveys
c.
only food, clothing, transportation, entertainment, and education
d.
the least expensive and the most expensive goods and services in each major category of consumer
expenditures
16. Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the
consumer price index for this economy for two or more consecutive years, we assume that
a.
the number of apples bought by the typical consumer is equal to the number of pears bought by the typical
consumer in each year.
b.
neither the number of apples nor the number of pears bought by the typical consumer changes from year to
year.
c.
the percentage change in the price of apples is equal to the percentage change in the price of pears from year to
year.
d.
neither the price of apples nor the price of pears changes from year to year.
17. Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the
consumer price index for this economy for two or more consecutive years, we assume that
a.
the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from
year to year.
b.
the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical
consumer in each year.
c.
neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to
year.
d.
neither the price of pretzels nor the price of cookies changes from year to year.
18. To calculate the CPI, the Bureau of Labor Statistics uses
a.
the prices of all goods and services produced domestically.
b.
the prices of all final goods and services.
c.
the prices of all consumer goods.
d.
the prices of some consumer goods.
19. When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following
changes from year to year?
a.
the quantities of the goods and services purchased
b.
the prices of the goods and services
c.
the goods and services making up the basket
d.
All of the above are correct.
20. In computing the consumer price index, a base year is chosen. Which of the following statements about the base year
is correct?
a.
The base year is always the first year among the years for which computations are being made.
b.
It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not
necessary to designate a base year.
c.
The value of the consumer price index is always 100 in the base year.
d.
The base year is always the year in which the cost of the basket was highest among the years for which
computations are being made.
21. For any given year, the CPI is the price of the basket of goods and services in the
a.
given year divided by the price of the basket in the base year, then multiplied by 100.
b.
given year divided by the price of the basket in the previous year, then multiplied by 100.
c.
base year divided by the price of the basket in the given year, then multiplied by 100.
d.
previous year divided by the price of the basket in the given year, then multiplied by 100.
22. The inflation rate is calculated
a.
by determining the change in the price index from the preceding period.
b.
by adding up the price increases of all goods and services.
c.
by computing a simple average of the price increases for all goods and services.
d.
by determining the percentage increase in the price index from the preceding period.
23. The inflation rate is calculated
a.
by determining the change in the price index from the preceding period.
b.
by determining the change in the price index from the base year.
c.
by determining the percentage change in the price index from the preceding period.
d.
by determining the percentage change in the price index from the base year.
24. If 2012 is the base year, then the inflation rate for 2012 equals
a.
b.
c.
d.
25. If 2010 is the base year, then the inflation rate in 2015 equals
a.
b.
c.
d.
26. Which of the following is the correct formula for calculating the consumer price index?
a.
b.
c.
d.
27. Which of the following is the correct formula for calculating the inflation rate?
a.
b.
c.
d.
28. If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be
a.
2012.
b.
2013.
c.
2014.
d.
The base year cannot be determined from the given information.
29. Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base
year. In 2012, the basket’s cost was $80.00; in 2013, the basket’s cost was $84; and in 2014, the basket’s cost was $87.60.
The value of the CPI was
a.
100 in 2012.
b.
105 in 2013.
c.
109.5 in 2014.
d.
All of the above are correct.
30. Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base
year. In 2012, the basket’s cost was $50; in 2014, the basket’s cost was $51; and in 2016, the basket’s cost was $52. The
value of the CPI in 2014 was
a.
98.0.
b.
102.0.
c.
104.0.
d.
151.0.
31. Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base
year. In 2012, the basket’s cost was $50; in 2014, the basket’s cost was $52; and in 2016, the basket’s cost was $55. The
value of the CPI in 2016 was
a.
90.9.
b.
104.0.
c.
105.0.
d.
110.0.
32. Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basket’s cost was $80; in
2008, the basket’s cost was $92; and in 2010, the basket’s cost was $108. The base year must be
a.
2002.
b.
2008.
c.
one of the years between 2008 and 2010.
d.
The base year cannot be determined from the given information.
33. Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base
year. In 2012, the basket’s cost was $50; in 2014, the basket’s cost was $52; and in 2016, the basket’s cost was $58. The
value of the CPI in 2016 was
a.
106.0.
b.
104.0.
c.
111.5.
d.
116.0.
34. Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base
year. In 2012, the basket’s cost was $77; in 2013, the basket’s cost was $82; and in 2014, the basket’s cost was $90. The
value of the CPI in 2014 was
a.
109.8 and the inflation rate was 9.8%.
b.
109.8 and the inflation rate was 16.9%.
c.
116.9 and the inflation rate was 9.8%.
d.
116.9 and the inflation rate was 16.9%.
35. Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base
year. In 2013, the basket’s cost was $80; in 2014, the basket’s cost was $86; and in 2015, the basket’s cost was $90. The
value of the CPI in 2015 was
a.
112.5 and the inflation rate was 12.5%.
b.
112.5 and the inflation rate was 4.6%.
c.
104.6 and the inflation rate was 4.6%.
d.
104.6 and the inflation rate was 12.5%.
36. Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base
year. In 2007, the basket’s cost was $64; in 2009, the basket’s cost was $68; and in 2011, the basket’s cost was $70. The
value of the CPI in 2011 was
a.
97.14.
b.
100.10.
c.
102.94.
d.
109.38.
37. If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was
a.
1.06 percent.
b.
6 percent.
c.
10.6 percent.
d.
106 percent.
38. The price index was 220 in one year and 238.2 in the next year. What was the inflation rate?
a.
8.3 percent
b.
108.3 percent
c.
4.8 percent
d.
38.2 percent
39. The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?
a.
5.0 percent
b.
6.0 percent
c.
7.2 percent
d.
105 percent
40. The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?
a.
1.04 percent
b.
4.41 percent
c.
6.00 percent
d.
42.00 percent
41. If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?
a.
45.5%
b.
20.0%
c.
16.7%
d.
9.1%
42. From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education
between 2009 and 2010?
a.
0.9%
b.
9.0%
c.
2.5%
d.
90%
43. For an imaginary economy, the value of the consumer price index was 140 in 2013 and 146.5 in 2014. The economy’s
inflation rate for 2014 was
a.
4.6 percent.
b.
6.5 percent.
c.
4.4 percent.
d.
46.5 percent.
44. From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?
a.
5.7 percent
b.
6.0 percent
c.
9.0 percent
d.
59.0 percent
Table 24-1
The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the
year 2005 is used as the base year.
Year
Consumer
Price Index
Inflation Rate
2005
100
2006
115
B
2007
125
C
2008
140
D
2009
A
10%
2010
160
E
45. Refer to Table 24-1. What belongs in space C?
a.
120
b.
25%
c.
8.7%
d.
12%
46. Refer to Table 24-1. What belongs in space D?
a.
12%
b.
154
c.
40%
d.
15%
