Measuring the Cost of Living 21
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.
22 Measuring the Cost of Living
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.
Measuring the Cost of Living 23
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.
24 Measuring the Cost of Living
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%.
Measuring the Cost of Living 25
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.
26 Measuring the Cost of Living
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
Measuring the Cost of Living 27
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%
28 Measuring the Cost of Living
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.
Measuring the Cost of Living 29
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%
30 Measuring the Cost of Living
46. Refer to Table 24–1. What belongs in space D?
a. 12%
b. 154
c. 40%
d. 15%
47. Refer to Table 24–1. What belongs in space A?
a. 14
b. 150
c. 144
d. 154
48. Refer to Table 24–1. What belongs in space E?
a. 60%
b. 6%
c. 3.9%
d. 6.7%
Measuring the Cost of Living 31
49. The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2
shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts
cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00
per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year,
what was Aquilonia’s inflation rate in 2006?
a. 4 percent
b. 11 percent
c. 19.6 percent
d. 24.4 percent
50. Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI
in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this
one-year period?
a. 3.3 percent for Canada and 9.1 percent for Mexico
b. 3.3 percent for Canada and 8.3 percent for Mexico
c. 3.2 percent for Canada and 9.1 percent for Mexico
d. 3.2 percent for Canada and 8.3 percent for Mexico
32 Measuring the Cost of Living
51. Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following
statements is correct?
a. The economy experienced inflation between 2004 and 2005 and between 2005 and 2006.
b. The inflation rate was positive between 2004 and 2005, and it was negative between 2005 and
2006.
c. The inflation rate was higher between 2005 and 2006 than it was between 2004 and 2005.
d. All of the above are correct.
52. The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The
inflation rate was about
a. 5.6 percent between the first and second years, and 7.7 percent between the second and third
years.
b. 5.9 percent between the first and second years, and 8.3 percent between the second and third
years.
c. 10 percent between the first and second years, and 15 percent between the second and third
years.
d. 80 percent between the first and second years, and 95 percent between the second and third
years.
Measuring the Cost of Living 33
53. The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year.
The economy experienced
a. 5.0 percent deflation between the first and second years, and 3.0 percent deflation between the
second and third years.
b. 7.5 percent deflation between the first and second years, and 4.3 percent deflation between the
second and third years.
c. 5.3 percent inflation between the first and second years, and 4.1 percent inflation between the
second and third years.
d. 7.5 percent inflation between the first and second years, and 4.3 percent inflation between the
second and third years.
54. If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced
a. 10 percent inflation between years 1 and 2, and 5 percent inflation between years 2 and 3.
b. 10 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.
c. 11.1 percent inflation between years 1 and 2, and 5 percent inflation between years 2 and 3.
d. 11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.
34 Measuring the Cost of Living
55. The price index was 150 in the first year, 160 in the second year, and 165 in the third year. Which
of the following statements is correct?
a. The price level was higher in the second year than in the first year, and it was higher in the
third year than in the second year.
b. The inflation rate was positive between the first and second years, and it was positive between
the second and third years.
c. The inflation rate was lower between the second and third years than it was between the first
and second years.
d. All of the above are correct.
56. In a particular economy, the price index was 120 in 2012 and 130 in 2013. Which of the following
statements is correct?
a. The economy experienced a rising price level between 2012 and 2013.
b. The economy experienced a higher inflation rate between 2012 and 2013 than it had
experienced between 2011 and 2012.
c. The inflation rate between 2012 and 2013 was 10 percent.
d. The base year is 2011.
Measuring the Cost of Living 35
57. Which of the following changes in the price index produces the greatest rate of inflation: 80 to 100,
100 to 120, or 150 to 170?
a. 80 to 100
b. 100 to 120
c. 150 to 170
d. All of these changes produce the same rate of inflation.
58. Which of the following changes in the price index produces the greatest rate of inflation: 106 to
112, 112 to 118, or 118 to 124?
a. 106 to 112
b. 112 to 120
c. 118 to 126
d. All of these changes produce the same rate of inflation.
36 Measuring the Cost of Living
59. Which of the following changes in the price index produces the greatest rate of inflation: 100 to
110, 150 to 165, or 180 to 198?
a. 100 to 110
b. 150 to 165
c. 180 to 198
d. All of these changes produce the same rate of inflation.
60. Which of the following changes in the price index produces the greatest rate of inflation: 12 to 15,
20 to 24, or 30 to 35?
a. 12 to 15
b. 20 to 24
c. 30 to 35
d. All of these changes produce the same rate of inflation.
Measuring the Cost of Living 37
61. If the CPI was 110 this year and 100 last year, then
a. the cost of the CPI basket of goods and services increased by 10 percent this year.
b. the price level increased by 110 percent this year.
c. the inflation rate for this year was 10 percent higher than the inflation rate for last year.
d. All of the above are correct.
62. If the CPI was 125 this year and 120 last year, then
a. the cost of the CPI basket of goods and services increased by 4.2 percent this year.
b. the price level increased by 4.2 percent this year.
c. the inflation rate for this year was 4.2 percent.
d. All of the above are correct.
38 Measuring the Cost of Living
63. In an imaginary economy, consumers buy only hot dogs and hamburgers. The fixed basket
consists of 10 hot dogs and 6 hamburgers. A hot dog cost $3 in 2006 and $5.40 in 2007. A
hamburger cost $5 in 2006 and $6 in 2007. Which of the following statements is correct?
a. When 2006 is chosen as the base year, the consumer price index is 90 in 2007.
b. When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007.
c. When 2007 is chosen as the base year, the consumer price index is 100 in 2006.
d. When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007.
64. In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket
consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost
$2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was
125, then how much did a magazine cost in 2007?
a. $0.83
b. $2.25
c. $2.50
d. $3.00
Measuring the Cost of Living 39
65. In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket
consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost
$2. In 2007, a sandwich cost $5. The base year is 2006. If the inflation rate in 2007 was 16
percent, then how much did a magazine cost in 2007?
a. $1.87
b. $2.08
c. $2.32
d. $3.00
66. In an imaginary economy, consumers buy only razors and cologne. The fixed basket consists of 6
razors and 4 bottles of cologne. A razor cost $20 in 2009 and $25 in 2010. A bottle of cologne cost
$30 in 2009 and $40 in 2010. Using 2009 as the base year, which of the following statements is
correct?
a. For the typical consumer, the number of dollars spent on razors is equal to the number of
dollars spent on cologne in each of the two years.
b. The consumer price index is 310 in 2010.
c. The rate of inflation is 29.17% in 2010.
d. None of the above is correct.
40 Measuring the Cost of Living
67. The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013.
The price index in 2012 was
a. 104.0.
b. 103.2.
c. 158.7.
d. 152.0.
68. The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014.
The price index in 2013 was
a. 100.0.
b. 100.7.
c. 83.3.
d. 84.6.