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WorksheetsChapter11e
Total questions: 10
Worksheet time: 3mins
Name
Class
Date
1.
How are the weights on the various goods and services in the CPI basket determined?
a)
All goods and services are weighted equally.
b)
A survey is conducted to determine how much of each good and service typical consumers purchase.
c)
the weights equal the ratio of expenditures on each good or service divided by the total consumption expenditures in the GDP accounts.
d)
Each good and service is weighted according to its price.
2.
For the CPI, the base year is
a)
the benchmark against which other years are compared, and it changes each year.
b)
the benchmark against which other years are compared, and it changes occasionally.
c)
the year the CPI first appeared.
d)
always 1989.
3.
The inflation rate is calculated
a)
from a survey of consumer spending.
b)
by adding up the price increases of all goods and services.
c)
by computing a simple average of the price increase in all goods and services.
d)
by determining the percentage increase in the price index from the preceding period.
4.
The producer price index measures the cost of a basket of goods and services
a)
typical of those produced in the economy.
b)
produced for a typical consumer.
c)
sold by producers.
d)
bought by firms.
5.
The goal of the consumer price index is to measure changes in the
a)
costs of production
b)
cost of living.
c)
relative prices of consumer goods.
d)
production of consumer goods.
6.
Suppose the price of a quart of milk rises from $1 to $1.25 and the price of a T-shirt rises from $8 to $10. If the CPI rises from 150 to 175 people will likely buy
a)
more milk and more T-shirts.
b)
more milk and fewer T-shirts.
c)
less milk and more T-shirts.
d)
less milk and fewer T-shirts.
7.
Which change in the price index shows 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 changes show the same rate of inflation.
8.
When the quality of a good improves the purchasing power of the dollar
a)
increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
b)
increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
c)
decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
d)
decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
9.
If the prices of Australian-made shoes imported into the United States increase,
a)
both the GDP deflator and the consumer price index will increase.
b)
neither the GDP deflator nor the consumer price index will increase.
c)
the GDP deflator will increase but the consumer price index will not increase.
d)
the consumer price index will increase, but the GDP deflator will not increase.
10.
In general, if a consumer good is produced domestically and consumed domestically, a reduction in its price will have which of the following effects?
a)
The consumer price index will decrease relatively more than the GDP deflator will.
b)
The consumer price index and the GDP deflator will decrease by the same amount.
c)
The consumer price index will decrease relatively less than the GDP deflator will.
d)
One cannot generalize about the relative decrease in the two price indices.
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