Quiz on Measuring the Cost of Living

What does the Consumer Price Index (CPI) measure?

• The total income of consumers in a year

• The overall cost of goods and services bought by a typical consumer

• The total number of goods produced in a year

• The average salary of workers in a country

What is the Core CPI?

• A measure including all consumer goods

• A measure excluding food and energy costs

• A measure of only energy costs

• A measure of government spending

What does the Producer Price Index (PPI) measure?

• The cost of consumer goods only

• The average price of stocks

• The total revenue of producers

• The cost of a basket of goods sold by domestic firms

What is the formula to compute the CPI?

• CPI = (Current year price / Previous year price) x 100

• CPI = (Basket's cost in base year / Basket's cost in current year) x 100

• CPI = (Total goods produced / Total goods sold) x 100

• CPI = (Basket's cost in current year / Basket's cost in base year) x 100

What is the inflation rate formula?

• Inflation rate = (Total cost of goods / Total number of goods) x 100

• Inflation rate = (CPI this year + CPI last year) / 2

• Inflation rate = (CPI last year - CPI this year) / CPI last year x 100

• Inflation rate = (CPI this year - CPI last year) / CPI last year x 100

In the example provided, what was the CPI for the year 2022?

• 128.6

• 114.3

• 100

• 240

What is the inflation rate from 2022 to 2023 in the example?

• 15%

• 14.3%

• 12.5%

• 10%

What is one problem with the CPI mentioned in the text?

• Substitution bias

• Inaccurate consumer surveys

• Excessive data collection

• Overestimation of production costs

What does the introduction of new goods do to the CPI?

• It can overstate increases in the cost of living

• It has no effect on the CPI

• It decreases the CPI

• It stabilizes the CPI

What is the difference between the CPI and the GDP deflator regarding imported goods?

• CPI includes imported goods, GDP deflator does not

• GDP deflator includes imported goods, CPI does not

• Both include imported goods

• Neither includes imported goods