ECON 20B Chapter 24: Chapter 24

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Bls (bureau of labor statistics, department of labor) Price index which uses a fixed market basket of goods and services purchase by the typically consumers: Cpi measures the cost" to the typical consumer of a representative basket of goods and services. At 1999 prices, the typical consumer must spend to purchase the marker basket of goods and services. Cpi = [price(expenditure) of the fixed basket in the current year/price(expenditure) of the fixed basket in the base year ] *100. Cpi (/)*100 = 100 (/)*100 = 120 (/)*100 = 122. [cost of living increased by 1. 7% over this period] Cpi basket - see figure 1 in the book. The bls conducts extensive nationwide surveys on families" and individual" spending habit. The result are used to construct a representative market basket of goods and services consumed by the reference population. Bls classifies all items into more than 200 categories, arranged into eight major groups.

Related Questions

Table 24-7. The table below applies to an economy with only two goods â hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.

Year	Price of hamburgers	Price of hot dogs
2009	$5	$3
2010	5.50	3.30
2011	5.61	3.63

Refer to Table 24-7. Between 2009 and 2011, the cost of living increased by

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

A. the CPI is calculated more often than the GDP deflator is.

B. the CPI is easier to measure.

C. the GDP deflator cannot be used to gauge inflation.

D. the CPI better reflects the goods and services bought by consumers.

A COLA automatically raises the wage when:

A. the consumer price index increases.

B. the producer price index increases.

C. taxes increase.

D. GDP increases.

The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.

Year	Consumer Price Index	Inflation Rate
2005	100
2006	115	B
2007	125	C
2008	140	D
2009	A	10%
2010	160	E

8.7%

120

25%

12%

The price index was 170 in the first year, 180 in the second year, and 195 in the third year. The inflation rate was about

5.9 percent between the first and second years, and 8.3 percent between the second and third years.

5.6 percent between the first and second years, and 7.7 percent between the second and third years.

10 percent between the first and second years, and 15 percent between the second and third years.

80 percent between the first and second years, and 95 percent between the second and third years.

0.1 points

QUESTION 17

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced

		5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second and third years.
		7.5 percent deflation between the first and second years, and 4.3 percent deflation between the second and third years.
		5.3 percent inflation between the first and second years, and 4.1 percent inflation between the second and third years.
		7.5 percent inflation between the first and second years, and 4.3 percent inflation between the second and third years

0.1 points

QUESTION 18

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

The real interest rate is the nominal interest rate minus the rate of inflation.

The real interest rate is the nominal interest rate times the rate of inflation.

The real interest rate is the nominal interest rate plus the rate of inflation.

The real interest rate is the nominal interest rate divided by the rate of inflation.

0.1 points

QUESTION 19

If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is

4 percent.

-4 percent.

3 percent.

8 percent.

0.1 points

QUESTION 20

If the nominal interest rate is 7 percent and the real interest rate is -2.5 percent, then the inflation rate is

9.5 percent.

4.5 percent.

-4.5 percent.

-9.5 percent.

. From 2009 to 2010, the CPI for education increased from 279.3 to 281.8. What was the inflation rate for education between 2009 and 2010?

0.9%

9.0%

2.5%

90%

If the consumer price index changes from 125 in September to 150 in October, what is the rate of inflation?

20.0%

45.5%

16.7%

9.1%

. Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basketâs cost was $80; in 2014, the basketâs cost was $86; and in 2015, the basketâs cost was $90. The value of the CPI in 2015 was

104.6 and the inflation rate was 4.6%.

112.5 and the inflation rate was 4.6%.

112.5 and the inflation rate was 12.5%.

104.6 and the inflation rate was 12.5%.

Suppose a basket of goods and services has been selected to calculate the CPI. In 2002, the basketâs cost was $80; in 2008, the basketâs cost was $92; and in 2010, the basketâs cost was $108. The base year must be

The base year cannot be determined from the given information.

2002

2008

one of the years between 2008 and 2010.

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basketâs cost was $80.00; in 2013, the basketâs cost was $84; and in 2014, the basketâs cost was $87.60. The value of the CPI was

All of the above are correct.

109.5 in 2014.

105 in 2013.

100 in 2012.

Which of the following is correct?

The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.

The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers.

The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers.

The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

The inflation rate is defined as the

percentage change in the price level from the previous period.

price level in an economy.

change in the price level from one period to the next.

price level minus the price level from the previous period.

Economists use the term inflation to describe a situation in which

the economy's overall price level is rising.

some prices are rising faster than others.

the economy's overall price level is high, but not necessarily rising.

the economy's overall output of goods and services is rising faster than the economy's overall price level.

This question tests your knowledge of what activities are includedin calculating GDP. Decide for each item whether it is part of GDPand, if so, to which expenditure category it belongs.

2. Purchase of 100 shares of General Motors stock:

A. Not counted in GDP

B. Counted as part of consumption

C. Counted as part of investment

D. Counted as part of government

E. Counted as part of net exports

3. Consider the following three individuals.

Julie did not work for pay last week, but she met with a jobcounselor and went on two job interviews.

Jack was laid off from his job at a furniture store six months ago.He has a family to support and is frustrated with his inability tofind a full-time position. Last week he took a part-time job at afast-food restaurant, but could work only three hours.

Patricia has been out of work for almost a year. She desperatelyneeds a job but has become so discouraged that she has given up onher job search.

Which of these people would be considered unemployed by the Bureauof Labor Statistics (BLS)?

A. Julie

B. Jack

C. Patricia

D. Julie and Jack

E. Julie and Patricia

F. Jack and Patricia

G. All three individuals

H. None of the individuals

4. Which of the following individuals would NOT be consideredunemployed under the Bureau of Labor Statistics criteria?

A. An assembly-line worker for General Motors who is laid offbecause of a reduction in car sales.

B. An assembly-line worker for General Motors who quits her job andreturns to college on a full-time basis.

C. An assembly-line worker for General Motors who quits her job butis interviewing for a position as a part-time bank teller.

D. A recent high-school graduate who is seeking his first job as anassembly-line worker at General Motors.

This table shows employment data for the United States for December2002. The civilian unemployment rate, which is the most commonjobless statistic quoted in the press, only includes non-militaryand non-institutionalized adults 16 years of age and older. Allnumbers are in thousands of people.

Civilian Non-Institutional Population
(16 years of age and over) Employed Unemployed

214,968 133,952 8,590

Source: Economic Report of the President, 2003

5.1. What was the unemployment rate in December 2002? (Express youranswer to the nearest tenth of a percent.)

%
Please enter 1 digit after the decimal point.

This table shows employment data for the United States for December2002. The civilian unemployment rate, which is the most commonjobless statistic quoted in the press, only includes non-militaryand non-institutionalized adults 16 years of age and older. Allnumbers are in thousands of people.

Civilian Non-Institutional Population
(16 years of age and over) Employed Unemployed

214,968 133,952 8,590

Source: Economic Report of the President, 2003

5.2. What was the labor force participation rate in December 2002?(Express your answer to the nearest tenth of a percent.)

%
Please enter 1 digit after the decimal point.

6. The Consumer Price Index measures:

A. The cost of all goods and services produced within a country'sborders

B. The cost of goods and services consumed by a typicalhousehold

C. The change in income received by a typical household

D. The cost of keeping a family above the poverty line

7. Which of the following is NOT a characteristic of discouragedworkers?

A. They want a job.

B. They are not currently working.

C. They are counted as unemployed by the government.

8. If gross investment is $50 billion and depreciation is $20billion, the economy's capital stock rises by:

A. $70 billion

B. $50 billion

C. $30 billion

D. $20 billion

9. The table shows the distribution of total expenditure on the CPImarket basket across several broad categories.
Category of Goods and Services Percent of
Market Basket

Apparel 4%
Education and Communication 6%
Food and Beverages
16%
Housing 41%
Medical Care 6%
Other Goods and Services 4%
Recreation 6%
Transportation 17%

Source: Bureau of Labor Statistics
Which of the following will have the biggest impact on theCPI?

A. A 4% increase in the cost of apparel

B. A 4% increase in the cost of medical care

C. A 4% decrease in the cost of recreation

D. A 4% increase in the cost of food and beverages

. Which of the following activities would be included in thecalculation of GDP for the United States?

A. Texas Instruments produces computer chips at a manufacturingfacility in Indonesia.

B. I chop down a cherry tree on my property and make a dining roomtable. I saw a similar table sell for $800 in a local furniturestore.

C. Honda, a leading Japanese automobile company, produces 25,000Accords at its Indiana plant and exports them back to Japan.

D. Goodyear Tire Company manufactures 250,000 tires. The tires areto be sold to General Motors, which will put them on newautomobiles.

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ECON 20B Chapter 24: Chapter 24

ECON 20B Full Course Notes

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