Principles of Economics Study Set 3

Business

Quiz 24 :
Measuring the Cost of Living

Quiz 24 :
Measuring the Cost of Living

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The consumer price index is used to monitor changes in an economy's production of goods and services over time.
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True False
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False

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When the consumer price index falls,the typical family has to spend fewer dollars to maintain the same standard of living.
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True False
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Answer:

True

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Economists use the term inflation to describe a situation in which the economy's overall price level is rising.
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True False
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Answer:

True

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The inflation rate is the absolute change in the price level from the previous period.
True False
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Inflation can be measured using either the GDP deflator or the consumer price index.
True False
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The inflation rate reported in the news is usually calculated from the GDP deflator rather than the consumer price index.
True False
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Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does,it is the more common gauge of inflation.
True False
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The CPI is a measure of the overall cost of the goods and services bought by a typical consumer.
True False
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Each week,the Bureau of Labor Statistics computes and reports the consumer price index.
True False
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The Bureau of Labor Statistics is part of the U.S.Department of Labor.
True False
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The Bureau of Labor Statistics determines which prices are most important to the typical consumer by surveying consumers.
True False
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The content of the basket of goods and services used to compute the CPI changes every month.
True False
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By keeping the basket of goods and services the same when computing the CPI,the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time.
True False
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When the consumer price index is computed,the base year is always the first year among the years being considered.
True False
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The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year,then multiplying by 100.
True False
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The CPI is always 1 in the base year.
True False
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If the current year CPI is 140,then the price level has increased 40 percent since the base year.
True False
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If the current year CPI is 90,then the price level has decreased 10 percent since the base year.
True False
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The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006)by the CPI in 2006,then multiplying by 100.
True False
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If the value of the consumer price index is 110 in 2005 and 121 in 2006,then the inflation rate is 11 percent for 2006.
True False
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