1. The primary purpose of measuring the overall level of prices in the economy is to
a.
allow for the measurement of GDP.
b.
allow consumers to know what kinds of prices to expect in the future.
c.
allow for the comparison of dollar figures from different points in time.
d.
allow for the comparison of dollar figures from the same point in time.
2. Babe Ruth’s 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 237 for
2015. Ruth’s 1931 salary was equivalent to a 2015 salary of about
a.
$5,296.
b.
$1,128,421
c.
$1,247,368
d.
$17,152,000
3. When we express Babe Ruth’s 1931 salary in today’s dollars and compare his salary to those of current New York
Yankee players, we find that the current median salary of today’s Yankees is
a.
about three quarters of Ruth’s salary.
b.
about the same as Ruth’s salary.
c.
about twice Ruth’s salary.
d.
more than four times Ruth’s salary.
4. In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of
a.
$4,965.
b.
$1,169,408.
c.
$1,057,894.
d.
$16,080,001.
5. In 1931 the price of a movie ticket was $0.25. The consumer price index was 15.2 in 1931, and 210 in 2008. Using
2008 prices, the real price of a movie in 1931 was
a.
$13.82.
b.
$52.50.
c.
$1.81.
d.
$3.45.
6. You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today. Which of
the following would you use to compute the price of the candy bar in today’s prices?
a.
five cents (1962 CPI / today’s CPI)
b.
five cents ((today’s CPI – 1962 CPI)/1962 CPI)
c.
five cents (today’s CPI / 1962 CPI)
d.
five cents today’s CPI – five cents 1962 CPI.
7. You know that a candy bar costs sixty cents today. You also know the CPI for 1962 and the CPI for today. Which of
the following would you use to compute the price of the candy bar in 1962 prices?
a.
sixty cents (today’s CPI – 1962 CPI)
b.
sixty cents (1962 CPI – today’s CPI)
c.
sixty cents (today’s CPI / 1962 CPI)
d.
sixty cents (1962 CPI / today’s CPI)
8. If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as
a.
$4.75 purchased in 1955.
b.
$20.00 purchased in 1955.
c.
$95.00 purchased in 1955.
d.
$500 purchased in 1955.
9. If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as
a.
$25.00 purchased in 1975.
b.
$33.33 purchased in 1975.
c.
$40.00 purchased in 1975.
d.
$135.55 purchased in 1975.
10. If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as
a.
$2.67 purchases today.
b.
$37.50 purchases today.
c.
$39.00 purchases today.
d.
$104.00 purchases today.
11. If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services
as
a.
$2.57 purchases today.
b.
$28.89 purchases today.
c.
$31.20 purchases today.
d.
$38.89 purchases today.
12. The CPI was 96 in 1982, and the CPI was 230 in 2012. How much money would you have needed in 2012 in order to
buy what you could have bought with $500 in 1982?
a.
$208.96
b.
$1,197.92
c.
$697.92
d.
$1,697.92
13. The CPI was 172 in 2007, and the CPI was 46.5 in 1982. If your parents put aside $1,000 for you in 1982, then how
much would you have needed in 2007 in order to buy what you could have bought with the $1,000 in 1982?
a.
$270.35
b.
$1,255.00
c.
$2,698.92
d.
$3,698.92
14. In 1969, Malcolm bought a Pontiac Firebird for $2,500. If the price index was 36.7 in 1969 and the price index was
235 in 2013, then what is the price of the Firebird in 2013 dollars?
a.
$4,609.57
b.
$4,957.51
c.
$13,508.17
d.
$16,008.17
15. Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25. If the
price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in
2006 dollars?
a.
$5.39
b.
$25.00
c.
$29.11
d.
$37.11
16. In 1986, Ken bought a Ford Mustang for $8,000. If the price index was 122 in 1986 and the price index was 280 in
2011, then what is the price of the Mustang in 2011 dollars?
a.
$3,485.71
b.
$8,100.71
c.
$18,360.66
d.
$22,400.00
17. David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and
215.3 in 2010. David’s 1994 salary in 2010 dollars is
a.
$43,849.05
b.
$61,263.43
c.
$63,195.34
d.
$93,655.50
18. If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as
a.
$23.86 purchased in 1965.
b.
$32.47 purchased in 1965.
c.
$68.00 purchased in 1965.
d.
$419.12 purchased in 1965.
19. If the CPI was 127 in 1972 and is 324 today, then $10 in 1972 purchased the same amount of goods and services as
a.
$3.92 purchases today.
b.
$25.51 purchases today.
c.
$207.00 purchases today.
d.
$324.00 purchases today.
20. In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about
$2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to
these numbers, the hospital cost about
a.
$3.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
b.
$3.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
c.
$4.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
d.
$4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
21. In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about
$1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to
these numbers, the hospital cost about
a.
$2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
b.
$2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
c.
$2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.
d.
$2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.
Scenario 24-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in 2005 read $1.00. The CPI in 1975
was 52.3, and the CPI in 2005 was 191.3.
22. Refer to Scenario 24–1. The price of a 1975 tennis ball in 2005 dollars is
a.
$0.03.
b.
$0.27.
c.
$0.37.
d.
$1.00.
23. Refer to Scenario 24–1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost
a.
$0.27, so tennis balls were cheaper in 1975.
b.
$0.27, so tennis balls were cheaper in 2005.
c.
$3.66, so tennis balls were cheaper in 1975.
d.
$3.66, so tennis balls were cheaper in 2005.
Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005 read $2.00. The CPI in 1975 was
52.3, and the CPI in 2005 was 191.3.
24. Refer to Scenario 24–2. The price of a 1975 golf ball in 2005 dollars is
a.
$0.05.
b.
$0.53.
c.
$0.73.
d.
$2.00.
25. Refer to Scenario 24–2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball cost
a.
$0.55, so golf balls were cheaper in 1975.
b.
$0.55, so golf balls were cheaper in 2005.
c.
$7.32, so golf balls were cheaper in 1975.
d.
$7.32, so golf balls were cheaper in 2005.
26. Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price index was 177 in 2001 and 225 in
2012. Henri’s 2001 salary in 2012 dollars is
a.
$39,333.33.
b.
$74,000.00.
c.
$89,333.33.
d.
$63,559.32.
27. Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5
in 2006. Henri’s 2006 salary in 2001 dollars is
a.
$35,000.00.
b.
$46,666.67.
c.
$61,950.00
d.
$105,000.00.
28. Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price index was 126 in 2004 and 170 in
2014. Janelle’s 2004 salary in 2014 dollars is
a.
$45,953.
b.
$89,280.
c.
$107,953.
d.
$83,651.
29. Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price index was 160 in 1996 and 266 in
2006. Janelle’s 2006 salary in 1996 dollars is
a.
$39,097.74.
b.
$43,062.50.
c.
$68,900.00.
d.
$108,062.50.
30. Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266
in 2006. Dewey’s 2001 salary in 2006 dollars is
a.
$37,711.86.
b.
$49,906.02.
c.
$66,750.00.
d.
$112,711.86.
31. Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price index was 177 in 2001 and 266
in 2006. Dewey’s 2006 salary in 2001 dollars is
a.
$47,768.36.
b.
$63,214.29.
c.
$84,550.00.
d.
$142,768.36.
32. Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been
promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is
Iggie’s 1980 salary in 2011 dollars?
a.
$5,400
b.
$20,466
c.
$26,158
d.
$41,159
33. Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been
promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is
Iggie’s 2011 salary in 1980 dollars?
a.
$25,511
b.
$52,073
c.
$40,140
d.
$41,159
34. Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo’s job
offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to
represent the same purchasing power?
a.
$42,000
b.
$65,625
c.
$68,880
d.
$189,000
35. Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York, where the CPI is 125. Arlo’s job
offer in Des Moines is for $48,000. How much does the New York job have to pay in order for the two salaries to
represent the same purchasing power?
a.
$23,040
b.
$52,000
c.
$79,200
d.
$100,000
36. Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and
221.25 in 2006. Ruben’s 2001 salary in 2006 dollars is
a.
$75,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
b.
$75,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
c.
$85,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
d.
$85,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
37. Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and
221.25 in 2006. Ruben’s 2006 salary in 2001 dollars is
a.
$20,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
b.
$20,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
c.
$64,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
d.
$64,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
38. In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was
40 in 1970, 60 in 1980, and 100 in 1990, then in real terms, Professor Plum’s salary was highest in
a.
1980 and lowest in 1970.
b.
1980 and lowest in 1990.
c.
1990 and lowest in 1970.
d.
1990 and lowest in 1980.
39. In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000; and in 1990, he earned $36,000. If the CPI was
40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum’s salary was highest in
a.
1970 and lowest in 1980.
b.
1970 and lowest in 1990.
c.
1980 and lowest in 1970.
d.
1980 and lowest in 1990.
40. Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009
and 231 for 2014. Harry’s 2009 spending in 2014 dollars is about
a.
$43,290.
b.
$37,143.
c.
$40,950.
d.
$40,857.
41. Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009
and 231 for 2014. Harry’s 2014 spending in 2009 dollars is about
a.
$40,000.
b.
$44,100.
c.
$37,838.
d.
$40,091.
Scenario 24-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today
and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013.
42. Refer to Scenario 24-3. Sue Holloway’s 1944 income in 2013 dollars is
a.
$23,033.
b.
$136,909.
c.
$148,909.
d.
$240,960.
43. Refer to Scenario 24-3. Josh Holloway’s 2013 income in 1944 dollars is
a.
$11,528.
b.
$16,923.
c.
$149,009.
d.
$26,059.
44. Refer to Scenario 24-3. In real terms, Josh Holloway’s income amounts to about what percentage of Sue Holloway’s
income?
a.
71 percent
b.
141 percent
c.
165 percent
d.
198 percent
45. Refer to Scenario 24-3. In real terms, Sue Holloway’s income amounts to about what percentage of Josh Holloway’s
income?
a.
11.0 percent
b.
65.2 percent
c.
70.9 percent
d.
114.7 percent
Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of
$50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the
CPI in Charlieville is 90.
46. Refer to Scenario 24–4. The Wrexington salary in Charlieville dollars is
a.
$30,000.00.
b.
$33,333.33.
c.
$45,000.00
d.
$83,333.33.
47. Refer to Scenario 24–4. The Charlieville salary in Wrexington dollars is
a.
$24,000.00.
b.
$26,666.67.
c.
$60,000.00
d.
$66,666.67.
48. Refer to Scenario 24–4. If Quinn only cares about maximizing her purchasing power, then she should
a.
take the Charlieville job.
b.
take the Wrexington job.
c.
take either job because they both have the same purchasing power.
d.
Table 24–11. Megan’s salary for three consecutive years, along with other values, is presented in the table below.
Year
2011
2012
2013
Salary
$65,000
$72,000
$76,000
Consumer Price Index
226
230
235
Real Interest Rate
2.5 percent
2.7 percent
1.8 percent
49. Refer to Table 24–11. Megan’s 2011 salary in 2013 dollars is
a.
$67,600.
b.
$67,489.
c.
$67,588.
d.
$70,850.
50. Refer to Table 24–11. Suppose the consumer price index for 2013 is not necessarily 235. Then Megan’s 2013 salary
represents more purchasing power than her 2011 salary as long as the consumer price index for 2013 is
a.
greater than 264.25.
b.
less than 264.25.
c.
greater than 258.71.
d.
less than 258.71.
51. Refer to Table 24–11. The nominal interest rate for 2012 is
a.
0.93 percent.
b.
6.70 percent.
c.
4.44 percent.
d.
4.47 percent.
52. Refer to Table 24–11. Suppose the consumer price index for 2013 is not necessarily 235. If the nominal interest rate
for 2013 is 7.3 percent , then the consumer price index for 2013 is, in fact,
a.
239.1.
b.
235.5.
c.
242.7.
d.
250.9.
Table 24–12. Will’s expenditures on food for three consecutive years, along with other values, are presented in the table
below.
Year
2009
2010
2011
Expenditures on Food
$5,000
$5,800
$6,600
Consumer Price Index
160.0
168.0
x
53. Refer to Table 24–12. Will’s 2009 food expenditures in 2010 dollars amount to
a.
$5,500.
b.
$5,250.
c.
$4,975.
d.
$3,625.
54. Refer to Table 24–12. To the nearest dollar, Will’s 2010 food expenditures in 2009 dollars amount to
a.
$5,236.
b.
$5,431.
c.
$5,524.
d.
$5,608.
55. Refer to Table 24–12. Suppose Will’s 2010 food expenditures in 2011 dollars amount to $6,235. Then x, the
consumer price index for 2011, has a value of
a.
171.2.
b.
175.0.
c.
177.5.
d.
180.6.