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AP Macro: CPI and Inflation

Total questions: 50

Worksheet time: 42mins

Name
Class
Date
1.
GDP that is NOT adjusted for inflation
a)
real GDP
b)
nominal GDP
c)
price level
d)
net national product
2.
GDP that is adjusted for inflation
a)
real GDP
b)
nominal GDP
c)
price level
d)
net national product
3.
The Consumer Price Index (CPI) is best used to determine
a)
the Dow Jones Index.
b)
the rate of inflation.
c)
the unemployment rate.
d)
currency exchange rates.
4.
When Inflation occurs,
a)
Price decreases in the economy
b)
The purchasing power of money decreases in the economy
c)
The dollar appreciates on foreign exchange markets
d)
Basic necessities become cheaper
5.
If the Price of the Market Basket in 2008 is $40 and the Price of the Market Basket in the base year is $20, what is the CPI for 2008?
a)
2
b)
60
c)
80
d)
200
6.
Did prices go up or down in 2009?
2008 CPI = 212
2009 CPI = 214
a)
Up
b)
Down
7.
Shawn just graduated from college. Why might Shawn benefit from rapid inflation in the economy?
a)
Purchasing a home will be easier.
b)
There will be more goods to purchase.
c)
Businesses are more likely to hire during times of inflation.
d)
Student loan repayments will not cost as much in real dollars.
8.
Which year is the base year?
1997 CPI = 95
1998 CPI = 97
1999 CPI = 100
2000 CPI = 104
a)
1997
b)
1998
c)
1999
d)
2000
9.
____________always decreases purchasing power
a)
fiscal policies
b)
inflation
c)
monopoly
d)
trade barriers
10.
__________ are common products that consumers buy in a month.(used for CPI)
a)
market basket
b)
inflation
c)
fiscal policies
d)
monetary policy
11.
Which of these are likely to be winners in periods of high, unanticipated inflation?
a)
Savers
b)
Lenders
c)
Borrowers at fixed interest rates
d)
People on fixed incomes
12.
If one wanted to know whether there had been inflation or not, the BEST measure to observe would be the
a)
GDP
b)
Business cycle
c)
CPI
d)
National Dept
13.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
14.
Which one of these correctly describes how lenders and borrowers are affected by inflation?
a)
lenders hurt, borrowers helped
b)
lenders hurt, borrowers hurt
c)
lenders helped, borrowers hurt 
d)
lenders helped, borrowers helped
15.
Someone buys a house with a 30 year fixed rate loan
a)
helped by inflation
b)
hurt by inflation
16.
A teacher puts all of his money into a savings account
a)
helped by inflation
b)
hurt by inflation
17.
If a country had a CPI of 104.0 last year and a CPI of 101.0 this year, then
a)
the average quality of goods and services between last year and this year.
b)
the average prices of goods and services increased between last year and this year.
c)
the average prices of goods and services decreased between last year and this year.
d)
the quantity of consumer goods and services produced decreased between last year and this year.
18.
While inflation is a rise in the general level of prices, economic growth is a
a)
short period during which the nation's total output of goods and services decreases.
b)
short period during which the nation's total output of goods and services increases.
c)
sustained period during which the nation's total output of goods and services decreases.
d)
sustained period during which the nation's total output of goods and services increases.
19.
If CPI last year was 177 and the CPI this year is 186, what is the rate of inflation?
a)
8%
b)
7%
c)
6%
d)
5%
20.
If CPI goes from 100 to 300 and your salary goes from $100,000 to $200,000, what happened to your purchasing power?
a)
Increased
b)
Decreased
c)
No change
d)
unable to determine with data given
21.
Bobby's income increased from $50,000 last year to $55,000 this year.  During the same time the CPI went from 155 to 165.  What was his real income change?
a)
4.6% increase
b)
10% increase
c)
10% decrease
d)
4.6% decrease
22.
What is the difference between Nominal and Real GDP?
a)
Nominal GDP includes imports from other countries, Real GDP does not
b)
Real GDP is adjusted for inflation, nominal is not
c)
Real GDP represents the current year, nominal represents a base year
23.
GDP per capita is found by
a)
Muliplying GDP by the population
b)
Dividing GDP by the population
c)
Multiplying GDP by the unemployment rate 
d)
Dividing current GDP by last year's GDP
24.
If nominal output is $100 billion dollars while real output is $90 billion dollars then the GDP deflator (Price Index) is
a)
approximately 100
b)
approximately 110
c)
approximately 111.1
d)
approximately -110
25.
A _______________ is a hypothetical set of consumer purchases of goods and services.
a)
Market Basket
b)
Aggregate Price Level
c)
Consumer Price Index (CPI)
d)
Producer Price Index (PPI)
26.
The _____________ measures the cost of the market basket of a typical urban American family.
a)
Consumer Price Index (CPI)
b)
Producer Price Index (PPI)
c)
Aggregate Price Level
d)
Inflation Rate
27.
The ____________ for a given year is 100 times the ratio of nominal GDP to real GDP that year.
a)
GDP Deflator
b)
Market Basket
c)
Aggregate Price Level
d)
Inflation Rate
28.
The total dollar value of goods and services produced by a nation, including goods and services produced abroad by US citizens and companies.
a)
Gross Domestic Product (GDP)
b)
Gross National Product (GNP)
c)
Consumer Price Index (CPI)
d)
Producer Price 'index (PPI)
29.

To measure the CPI, the BLS economic assistants check the prices of

a)

some of the consumer goods but none of the services provided in a given year.

b)

about 80,000 goods and services each quarter.

c)

only the prices of the goods and services whose prices have changed.

d)

about 80,000 consumer goods and services each month.

e)

all of the goods and services produced in a given year.

30.
As price level in the nation's economy decreases, 
a)
purchasing power increases
b)
purchasing power decreases
c)
supply increases
d)
foreign demand on goods decreases
31.
How does nominal GDP differ from Real GDP?
a)
Nominal GDP is expressed in base year prices.
b)
Real GDP is adjusted for inflation because it is expressed in base year prices.
c)
Real GDP does not reflect economic growth.
d)
Nominal and Real GDP are the same.
32.
To determine whether a country is meeting the  goal of economic growth, economists use
a)
Real GDP
b)
Nominal GDP
c)
Consumer Price Index
d)
Unemployment Rate
33.
A general decline in the level of prices is called 
a)
Inflation
b)
Deflation
c)
Stagnation
d)
Hyperinflation
34.

Who is most likely to be hurt by inflation?

a)

someone who borrowed money

b)

savers who put their money under their matress

c)

a business owner

d)

the U.S. government

35.
If Shermania's GDP in 2014 was $4,000 and it was $5,000 in 2015, what is the % change in GDP?
a)
100%
b)
10%
c)
200%
d)
25%
36.
If inflation is 10% and nominal GDP goes up by 20%, real GDP...
a)
goes up approximately 2%
b)
goes up approximately 10%
c)
goes up approximately 20%
d)
goes up approximately 30%
37.
If the cost of a market basket is $200 in Year 1 and $230 in Year 2, the price index for Year 2 with a Year 1 base is:
a)
100
b)
200
c)
115
d)
130
38.
CPI index for 2016 and 2017 was 125 and 120 respectively.  Based on the information provided, between 2016 and 2017
a)
Price increased by 4%
b)
Price decreased by 4%
c)
Price increased by 5%
d)
Price decreased by 5%
39.
If nominal out is $100 billion dollars while real output is $90 then the GDP deflator is
a)
approximately 100
b)
110
c)
111.1
d)
-110
40.
High levels of GDP per capita indicate...
a)
Higher levels of happiness 
b)
Higher standard of living
c)
Equal levels of wealth 
d)
Self-sufficient communities
41.

When the cost of the CPI market basket increases from one year to the next, we know that

a)

on the average, current prices are less than past year prices.

b)

on the average, current prices are below base year prices.

c)

the quantities of the goods and services contained in the CPI market basket have increased on the average.

d)

either the quantities of the goods and services contained in the CPI market basket have increased on the average and/or the prices of goods and services contained in the CPI market basket have increased on the average.

e)

the prices of goods and services contained in the CPI market basket have increased on the average.

42.

Nominal prices, sometimes called current dollar prices, measure the dollar value of a product at the time it was produced. Real prices are adjusted for general price level changes over time. Based on this information, which economic measure is best applied to determine real prices?

a)

unemployment

b)

store inventory

c)

interest rates

d)

inflation

43.

Which explanation best explains the effects of inflation?

a)

Consumers have more products to choose from.

b)

Inflation erodes (take away from) the purchasing power of the dollar.

c)

Inflation results in lower prices.

d)

Demand increases because prices are higher.

44.

Using GDP to measure a standard of living can be inaccurate because

a)

our standard of living depends solely on goods and services.

b)

our standard of living only depends on used goods and services.

c)

our standard of living does not depend only on goods and services.

d)

we use nominal GDP instead of real GDP.

45.
What the definition of deflation? 
a)
decrease in the average price of goods and services
b)
occurs when the price of goods and services rise
c)
increase in prices
d)
I don't know
46.
What is the main problem for people on a fixed income during a period of chronic inflation?
a)
Their income will not increase, so their purchasing power falls.
b)
They have to ask for an increase in wages to match inflation.
c)
Their investments will not pay as much interest.
d)
They have to wait for the government to react to the crisis.
47.
If the old CPI of a product is 200 and the new CPI is 100, what is the percent change?
a)
50
b)
25
c)
75
d)
100
48.
Niraj gets a 2% pay increase. The inflation rate is 3%
a)
helped by inflation 
b)
hurt by inflation
49.

The inflation rate is the

a)

difference between the current period CPI and the base period CPI.

b)

difference in the price level from one year to the next multiplied by 100.

c)

percentage change in the CPI from one year to the next.

d)

percentage change in composition of the CPI market basket from the base year to the next year.

e)

difference between the base period CPI and the current period CPI.

50.

If the price of a soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI was 172, then the real price of

a)

the 2007 soda in 1970 dollars is $3.44.

b)

the 1970 soda in 2007 dollars is 52 cents.

c)

a soda has risen 567%.

d)

the soda was 15 cents in 1970 and 50 cents in 2007.

e)

a soda has risen 350%.

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