Question : Multiple Choice – Section 00: Introduction 1.BabeRuth,thefamousbaseballplayer,earned$80,000in1931.Today,thebestbaseballplayerscanearnmorethan400timesasmuchasBabeRuthearnedin1931.However,priceshavealsorisensince1931.Weca : 1261682

Multiple Choice – Section 00: Introduction

1.BabeRuth,thefamousbaseballplayer,earned$80,000in1931.Today,thebestbaseballplayerscanearnmorethan400timesasmuchasBabeRuthearnedin1931.However,priceshavealsorisensince1931.Wecanconcludethat

a.thebestbaseballplayerstodayareabout400timesbetteroffthanBabeRuthwasin1931.

b.becausepriceshavealsorisen,thestandardoflivingofbaseballstarshasn’tchangedsince1931.

c.onecannotmakejudgmentsaboutchangesinthestandardoflivingbasedonchangesinpricesandchangesinincomes.

d.onecannotdeterminewhetherbaseballstarstodayenjoyahigherstandardoflivingthanBabeRuthdidin1931withoutadditionalinformationregardingincreasesinpricessince1931.

2.Theconsumerpriceindexisusedto

a.monitorchangesinthelevelofwholesalepricesintheeconomy.

b.monitorchangesinthecostoflivingovertime.

c.monitorchangesinthelevelofrealGDPovertime.

d.monitorchangesinthestockmarket.

3.Theconsumerpriceindexisusedto

a.convertnominalGDPintorealGDP.

b.turndollarfiguresintomeaningfulmeasuresofpurchasingpower.

c.characterizethetypesofgoodsandservicesthatconsumerspurchase.

d.measurethequantityofgoodsandservicesthattheeconomyproduces.

4.Whichofthefollowingisnotcorrect?

a.Theconsumerpriceindexgiveseconomistsawayofturningdollarfiguresintomeaningfulmeasuresofpurchasingpower.

b.Theconsumerpriceindexisusedtomonitorchangesinthecostoflivingovertime.

c.Theconsumerpriceindexisusedbyeconomiststomeasuretheinflationrate.

d.Theconsumerpriceindexisusedtomeasurethequantityofgoodsandservicesthattheeconomyisproducing.

5.Whentheconsumerpriceindexrises,thetypicalfamily

a.hastospendmoredollarstomaintainthesamestandardofliving.

b.canspendfewerdollarstomaintainthesamestandardofliving.

c.findsthatitsstandardoflivingisnotaffected.

d.canoffsettheeffectsofrisingpricesbysavingmore.

6.Whentheconsumerpriceindexfalls,thetypicalfamily

a.hastospendmoredollarstomaintainthesamestandardofliving.

b.canspendfewerdollarstomaintainthesamestandardofliving.

c.findsthatitsstandardoflivingisnotaffected.

d.cansavelessbecausetheydonotneedtooffsettheeffectsofrisingprices.

7.Economistsusetheterminflationtodescribeasituationinwhich

a.somepricesarerisingfasterthanothers.

b.theeconomy’soverallpricelevelisrising.

c.theeconomy’soverallpricelevelishigh,butnotnecessarilyrising.

d.theeconomy’soveralloutputofgoodsandservicesisrisingfasterthantheeconomy’soverallpricelevel.

8.Theterminflationisusedtodescribeasituationinwhich

a.theoveralllevelofpricesintheeconomyisincreasing.

b.incomesintheeconomyareincreasing.

c.stock-marketpricesarerising.

d.theeconomyisgrowingrapidly.

9.Whentheoveralllevelofpricesintheeconomyisincreasing,economistssaythattheeconomyisexperiencing

a.economicgrowth.

b.stagflation.

c.inflation.

d.deflation.

10.Theinflationrateisdefinedasthe

a.pricelevelinaneconomy.

b.changeinthepricelevelfromoneperiodtothenext.

c.percentagechangeinthepricelevelfromthepreviousperiod.

d.pricelevelminusthepricelevelfromthepreviousperiod.

11.Theeconomy’sinflationrateisthe

a.pricelevelinthecurrentperiod.

b.changeinthepricelevelfromthepreviousperiod.

c.changeinthegrossdomesticproductfromthepreviousperiod.

d.percentagechangeinthepricelevelfromthepreviousperiod.

12.Theinflationrateyouarelikelytohearonthenightlynewsiscalculatedfrom

a.theGDPdeflator.

b.theCPI.

c.theDowJonesIndustrialAverage.

d.theunemploymentrate.

13.Whichofthefollowingiscorrect?

a.TheGDPdeflatorisbetterthantheCPIatreflectingthegoodsandservicesboughtbyconsumers.

b.TheCPIisbetterthantheGDPdeflatoratreflectingthegoodsandservicesboughtbyconsumers.

c.TheGDPdeflatorandtheCPIareequallygoodatreflectingthegoodsandservicesboughtbyconsumers.

d.TheGDPdeflatorismorecommonlyusedasagaugeofinflationthantheCPIis.

14.TheCPIismorecommonlyusedasagaugeofinflationthantheGDPdeflatorisbecause

a.theCPIiseasiertomeasure.

b.theCPIiscalculatedmoreoftenthantheGDPdeflatoris.

c.theCPIbetterreflectsthegoodsandservicesboughtbyconsumers.

d.theGDPdeflatorcannotbeusedtogaugeinflation.

15.Whichofthefollowingstatementsiscorrect?

a.TheCPIcanbeusedtocomparedollarfiguresfromdifferentpointsintime.

b.ThepercentagechangeintheCPIisameasureoftheinflationrate,butthepercentagechangeintheGDPdeflatorisnotameasureoftheinflationrate.

c.Comparedtotheconsumerpriceindex(CPI),theGDPdeflatoristhemorecommongaugeofinflation.

d.TheGDPdeflatorbetterreflectsthegoodsandservicesboughtbyconsumersthandoestheCPI.