Question 1

The CPI is calculated
A)weekly.
B)monthly.
C)quarterly.
D)yearly.

Accepted Answer

The CPI (Consumer Price Index) is calculated monthly by the Bureau of Labor Statistics.

Question 2

The CPI is a measure of the overall cost of
A)the inputs purchased by a typical producer.
B)the goods and services purchased by a typical consumer.
C)the goods and services produced in the economy.
D)the stocks on the New York Stock Exchange.

Accepted Answer

The CPI (Consumer Price Index) measures the cost of goods and services purchased by a typical consumer, not inputs purchased by a typical producer or the goods and services produced in the economy as a whole. It also has nothing to do with stocks on the New York Stock Exchange.

Question 3

Which of the following agencies calculates the CPI?
A)the National Price Board
B)the Department Of Weight and Measurements
C)the Bureau of Labor Statistics
D)the Congressional Budget Office

Accepted Answer

The Bureau of Labor Statistics is responsible for calculating the CPI (Consumer Price Index), which measures changes in the prices of goods and services over time, and is widely used as a gauge of inflation. The other agencies listed are not responsible for calculating the CPI.

Question 4

The CPI is a measure of the overall cost of the goods and services bought by
A)a typical firm.
B)the government.
C)a typical consumer.
D)All of the above are correct.

Accepted Answer

The CPI, or Consumer Price Index, is a measure of the cost of goods and services purchased by a typical consumer. The other choices - A) a typical firm, and B) the government - do not accurately represent the intended purpose of the CPI.

Question 5

When computing the cost of the basket of goods and services purchased by a typical consumer,which of the following changes from year to year?
A)the quantities of the goods and services purchased
B)the prices of the goods and services
C)the goods and services making up the basket
D)All of the above are correct.

Accepted Answer

The answer of When computing the cost of the basket...

Question 6

Which of the following agencies calculates the CPI?
A)Bureau of Labor Statistics
B)Congressional Budget Office
C)Federal Reserve
D)Bureau of National Price Standards and Records

Accepted Answer

The Bureau of Labor Statistics is the agency responsible for calculating the Consumer Price Index (CPI).

Question 7

In the calculation of the CPI,tea is given greater weight than beer if
A)the price of tea is higher than the price of beer.
B)it costs more to produce tea than it costs to produce beer.
C)tea is more readily available than beer to the typical consumer.
D)consumers buy more tea than beer.

Accepted Answer

The weights assigned to different goods and services in the CPI are based on consumer expenditures. Since consumers buy more tea than beer, tea is assigned a greater weight than beer in the calculation of the CPI.

Question 8

Which entity within the U.S.government is responsible for computing and reporting the CPI?
A)the Department of Commerce
B)the Department of Labor
C)the General Accounting Office
D)the Council of Economic Advisers

Accepted Answer

The Department of Labor, specifically the Bureau of Labor Statistics, is responsible for computing and reporting the CPI.

Question 9

Consider a small economy in which consumers buy only two goods: pretzels and cookies.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that
A)the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year.
B)the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year.
C)neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.
D)neither the price of pretzels nor the price of cookies changes from year to year.

Accepted Answer

In order to compute the consumer price index, we need to keep the consumption patterns of the typical consumer constant from year to year. This means that the number of pretzels and cookies bought by the typical consumer cannot change from year to year, as stated in choice C. Choices A, B, and D are not necessary assumptions for computing the consumer price index.

Question 10

The CPI is a measure of the overall cost of the goods and services bought by
A)a typical consumer,and the CPI is computed and reported by the Department of the Treasury.
B)typical consumers and typical business firms,and the CPI is computed and reported by the Department of the Treasury.
C)a typical consumer,and the CPI is computed and reported by the Bureau of Labor Statistics.
D)typical consumers and typical business firms,and the CPI is computed and reported by the Bureau of Labor Statistics.

Accepted Answer

The CPI is a measure of the overall cost of goods and services bought by a typical consumer, and it is computed and reported by the Bureau of Labor Statistics. Option A is incorrect because the CPI is not reported by the Department of the Treasury, but rather by the Bureau of Labor Statistics. Option B is incorrect because the CPI only measures the cost of goods and services bought by consumers, not businesses. Option D is incorrect for the same reason as option B.

Question 11

In calculating the CPI,a fixed basket of goods and services is used.The quantities of the goods and services in the fixed basket are determined by
A)surveying consumers.
B)surveying sellers of the goods and services.
C)working backward from the rate of inflation to arrive at imputed values for those quantities.
D)arbitrary choices made by federal government employees.

Accepted Answer

The quantities of goods and services in the fixed basket are determined by surveying consumers. In order to accurately calculate the CPI, the basket needs to represent what the average consumer purchases. Therefore, surveying consumers is the best way to determine the items and quantities in the fixed basket.

Question 12

In the CPI,goods and services are weighted according to
A)how long a market has existed for each good or service.
B)the extent to which each good or service is regarded by the government as a necessity.
C)how much consumers buy of each good or service.
D)the number of firms that produce and sell each good or service.

Accepted Answer

The CPI weights goods and services according to how much consumers buy of each good or service. This reflects the importance of each item in the overall consumption basket and provides a more accurate measure of inflation.

Question 13

In computing the consumer price index,a base year is chosen.Which of the following statements about the base year is correct?
A)The base year is always the first year among the years for which computations are being made.
B)It is necessary to designate a base year only in the simplest case of two goods;in more realistic cases,it is not necessary to designate a base year.
C)The value of the consumer price index is always 100 in the base year.
D)The base year is always the year in which the cost of the basket was highest among the years for which computations are being made.

Accepted Answer

The value of the consumer price index is always set to 100 in the base year for ease of interpretation. This allows for comparisons to be made between different periods. A and D are incorrect because the base year can be any year and is not necessarily the first or the year with the highest basket cost. B is incorrect because a base year is necessary in all cases when computing the consumer price index.

Question 14

The CPI is calculated
A)monthly by the Department of Commerce.
B)monthly by the Bureau of Labor Statistics.
C)quarterly by the Department of Commerce.
D)quarterly by the Bureau of Labor Statistics.

Accepted Answer

The CPI is calculated monthly by the Bureau of Labor Statistics, which is a part of the U.S. Department of Labor.

Question 15

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that
A)the number of apples bought by the typical consumer is equal to the number of pears bought by the typical consumer in each year.
B)neither the number of apples nor the number of pears bought by the typical consumer changes from year to year.
C)the percentage change in the price of apples is equal to the percentage change in the price of pears from year to year.
D)neither the price of apples nor the price of pears changes from year to year.

Accepted Answer

The consumer price index (CPI) measures the average change in prices of goods and services consumed by households over time. In this small economy, where apples and pears are the only goods consumed, the CPI can be calculated by taking the average price of these two goods weighted by the quantities purchased by the typical consumer. Since the CPI is a measure of inflation, it is important to hold the quantities of goods consumed constant over time to isolate the effect of price changes. Therefore, choice B is the best choice as it assumes that the typical consumer purchases the same quantities of apples and pears in each year.

Question 16

What basket of goods and services is used to construct the CPI?
A)a random sample of all goods and services produced in the economy
B)the goods and services that are typically bought by consumers as determined by government surveys
C)only food,clothing,transportation,entertainment,and education
D)the least expensive and the most expensive goods and services in each major category of consumer expenditures

Accepted Answer

The CPI basket of goods and services is determined by government surveys that track what consumers typically purchase. This includes a variety of categories such as food, housing, transportation, healthcare, and entertainment. It is not a random sample, nor is it limited to a select few categories such as in choice C. It also does not consider only the extremes of expenses, as in choice D.

Question 17

To calculate the CPI,the Bureau of Labor Statistics uses
A)the prices of all goods and services produced domestically.
B)the prices of all final goods and services.
C)the prices of all consumer goods.
D)the prices of some consumer goods.

Accepted Answer

The CPI is calculated using the prices of a selected basket of consumer goods and services, not all consumer goods.

Question 18

In the calculation of the CPI,books are given greater weight than magazines if
A)consumers buy more books than magazines.
B)the price of books is higher than the price of magazines.
C)it costs more to produce books than it costs to produce magazines.
D)books are more readily available than magazines to the typical consumer.

Accepted Answer

The CPI (Consumer Price Index) measures the average change over time in the prices paid by urban consumers for a market basket of goods and services. The weight of each item in the basket is determined by its share of total expenditure. If consumers buy more books than magazines, then books would be given a greater weight in the calculation of CPI compared to magazines. This is because the CPI is meant to reflect the consumption patterns of average consumers, and if books are more commonly purchased than magazines, they should have a greater weight in the calculation. The price of books relative to magazines, cost of production, and availability are not relevant factors in determining the weight given to books versus magazines in the CPI.

Question 19

The steps involved in calculating the consumer price index and the inflation rate,in order,are as follows:
A)Choose a base year,update the basket,find the prices,estimate the basket's cost,compute the index,and compute the inflation rate.
B)Choose a base year,fix the basket,find the prices,compute the inflation rate,compute the basket's cost,and compute the index.
C)Fix the basket,find the prices,compute the basket's cost,choose a base year and compute the index,and compute the inflation rate.
D)Fix the basket,find the prices,compute the inflation rate,compute the basket's cost,and choose a base year and compute the index.

Accepted Answer

The correct sequence for calculating the consumer price index (CPI) and the inflation rate starts with fixing the basket of goods and services to understand what items consumers are buying. Then, the prices of these items are found for the current and base years. The next step is to compute the cost of this basket in both periods. After that, a base year is chosen to compare the current costs against, and the CPI is computed. Finally, the inflation rate is calculated by comparing the CPI over different periods.

Question 20

Reports on the current consumer price index are released every
A)quarter.
B)two weeks.
C)month.
D)week.

Accepted Answer

Reports on the current consumer price index are released monthly by the Bureau of Labor Statistics.

Quiz 11: Measuring the Cost of Living: The Consumer Price Index

The CPI is calculated

The CPI is a measure of the overall cost of

Which of the following agencies calculates the CPI?

The CPI is a measure of the overall cost of the goods and services bought by

When computing the cost of the basket of goods and services purchased by a typical consumer,which of the following changes from year to year?

Which of the following agencies calculates the CPI?

In the calculation of the CPI,tea is given greater weight than beer if

Which entity within the U.S.government is responsible for computing and reporting the CPI?

Consider a small economy in which consumers buy only two goods: pretzels and cookies.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

The CPI is a measure of the overall cost of the goods and services bought by

In calculating the CPI,a fixed basket of goods and services is used.The quantities of the goods and services in the fixed basket are determined by

In the CPI,goods and services are weighted according to

In computing the consumer price index,a base year is chosen.Which of the following statements about the base year is correct?

The CPI is calculated

Consider a small economy in which consumers buy only two goods: apples and pears.In order to compute the consumer price index for this economy for two or more consecutive years,we assume that

What basket of goods and services is used to construct the CPI?

To calculate the CPI,the Bureau of Labor Statistics uses

In the calculation of the CPI,books are given greater weight than magazines if

The steps involved in calculating the consumer price index and the inflation rate,in order,are as follows:

Reports on the current consumer price index are released every