Question

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 basket’s cost was $80; in 2014, the basket’s cost was $86; and in 2015, the basket’s 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 basket’s cost was $80; in 2008, the basket’s cost was $92; and in 2010, the basket’s 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 basket’s cost was $80.00; in 2013, the basket’s cost was $84; and in 2014, the basket’s 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.