Question : 41) The base period for CPI calculations generally 1982-84. In : 1244723

 

 

41) The base period for CPI calculations is generally 1982-84. In 2005, 50% of households accessed the Internet through a broadband connection that would not have existed in the 1980s. This potential for bias in the CPI is referred to as ________ bias and results in ________.

A) outlet bias; the CPI underestimating the true change in the cost of living

B) new product; the CPI overestimating the true change in the cost of living

C) outlet bias; the CPI overestimating the true change in the cost of living

D) net product; the CPI underestimating the true change in the cost of living

 

42) What is outlet bias?

A) the tendency for households to spend more money over time

B) the tendency for households to spend their money at discount stores as prices rise

C) the tendency for the quality of products to improve over time even though the CPI does not measure changes in quality

D) the tendency for consumers to purchase newer, more technologically advanced products even though they have higher prices

 

43) In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations?

A) new product bias

B) increase in quality bias

C) substitution bias

D) outlet bias

Table 13-10

Product

Quantity (2006)

Price (2006)

Expenditure (2006)

Price

(2013)

Expenditure  (on base year quantities) (2013)

Computers

             1

       $1,200

        $1,200

           $900

          $900

Books

           10

              25

             250

               30

            300

Burgers

           50

                3

             150

                 4

            200

                 Total

 

 

         $1,600

 

        $1,400

 

44) Refer to Table 13-10. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2006 is the base year, then what is the CPI for 2013?

A) 14.3

B) 87.5

C) 114.3

D) 160

 

Table 13-11

Product

Quantity (2005)

Price

(2005)

Expenditure (2005)

Price

(2013)

Expenditure (on base year quantities) (2013)

Hair cuts

             6

          $50

          $300

           $70

          $420

Backpacks

             4

            25

            100

             30

            120

Tacos

         100

              1

            100

               5

            500

                Total

 

 

          $500

 

       $1,040

 

45) Refer to Table 13-11. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2005 is the base year, then what is the CPI for 2013?

A) 40.08

B) 100

C) 180

D) 208

 

46) The PPI is the

A) price parity index.

B) prime producer index.

C) producer price index.

D) production performance indicator.

 

47) What does the PPI measure?

A) the average change in the prices paid for all goods produced in the economy over a given year

B) the average of the prices received by producers of goods and services at all stages of the production process

C) the level of production of goods and services generated in the economy in a given year

D) the difference between the prices consumers pay for goods and services and the prices producers pay for goods and services

 

48) The inflation rate measures the average prices of goods and services in the economy.

 

49) Housing is the largest component of the U.S. CPI market basket.

 

50) The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.