Chapter 11

When the consumer price index rises, the typical family

• has to spend more dollars to maintain the same standard of living
• can spend fewer dollars to maintain the same standard of living
• finds that its standard of living is not affected
• can offset the effects of rising prices by saving more

The consumer price index is used to

• track changes in the level of wholesale prices in the economy
• monitor changes in the cost of living
• monitor changes in the level of real GDP
• track changes in the stock market

The inflation rate is defined as the

• price level
• change in the price level
• price level divided by the price level in the previous period
• percentage change in the price level from the previous period

The CPI is a measure of the overall cost of

• inputs purchased by a typical producer
• goods and services bought by a typical consumer
• goods and services produced in the economy
• stocks on the New York Stock Exchange

The CPI is calculated

• weekly
• monthly
• quarterly
• yearly

In the CPI, goods and services are weighted according to

• how much consumers buy of each item
• whether the goods and services are necessities or luxuries
• the levels of production of the goods and services in the domestic economy
• by the expenditures on them in the GDP national income accounts

For the CPI, the base year is

• the benchmark against which other years are compared, and it changes each year
• the benchmark against which other years are compared, and it changes occasionally
• the year the CPI first appeared
• always 1989

If this year the CPI is 125 and last year it was 120, then we know that

• all goods have become more expensive
• the price level has increased
• the inflation rate has increased
• All of the above are correct

If the consumer price index was 100 in the base year and 107 the following year, the inflation rate was

• 107 percent
• 10.7 percent
• 7 percent
• None of the above are correct

Which change in the price index shows the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

• 80 to 100
• 100 to 120
• 150 to 170
• All changes show the same rate of inflation