19 - Measuring Inflation

1. Which group calculates the Consumer Price Index in the United States?

• a. the Bureau of Labor Statistics
• b. the Federal Reserve
• c. the Department of Commerce
• d. the Federal Open Market Committee
• e. the National Bureau of Economic Research

2. By what means are the components of the market basket for the Consumer Price Index determined?

• a. firm financial reports
• b. real GDP estimates
• c. household surveys
• d. store websites
• e. supermarket transaction data

3. The Consumer Price Index is calculated every

• a. six months
• b. year
• c. month
• d. two years
• e. quarter

4. Which term appears in the denominator in the calculation of CPI?

• a. aggregate price level in year t
• b. quantity consumed in year t
• c. aggregate price level in base year
• d. cost of the bundle in base year
• e. cost of the bundle in year t

5. According to the substitution effect, if the price of apples increases, then

• a. consumers will demand more apples
• b. a CPI basket that includes apples will understate the increase in the cost of living
• c. apples will hold a larger weight in the C PI
• d. consumers will cut back spending on all other goods
• e. households will shift consumption to oranges

6. Which commission found that CPI overstated the rate of price inflation by 1.3% per year?

• a. the Greene Commission
• b. the Boskin Commission
• c. the Okun Commission
• d. the Friedman Commission
• e. the Powell Commission

7. Which term appears in the numerator in the calculation of GDP deflator?

• a. GNP
• b. CPI in year t
• c. CPI in base year
• d. nominal GDP
• e. real GDP

8. Which of the followin g reasons BEST explains why the GDP deflator has risen less than the CPI?

• a. The GDP deflator uses a fixed market basket to weight goods.
• b. The GDP deflator includes foreign - produced goods.
• c. The GDP deflator removes the effect of quality change in goods .
• d. The GDP deflator adjusts to changing consumption patterns.
• e. The GDP deflator disregards the introduction of new goods and services.

9. Which of the following adults would the Bureau of Labor Statistics NOT consider to be employed?

• a. a basketball p layer who plays three games per week
• b. a financial planner who is on a beach vacation with his family
• c. a doctor who has been on sick leave for two weeks due to an injury
• d. a research assistant working as an unpaid intern
• e. a part - time math tutor who w orks 10 hours per week F OCUSED Q UIZ 19 P AGE 38 OF 80 D EMI D EC R ESOURCES ©2022

10. The labor force participation rate is calculated as the ratio of the

• a. employed to the labor force
• b. labor force to the working - age population
• c. employed to the working - age population
• d. employed to the unemployed
• e. working - a ge population to the total population