Question : 21) Most economists believe that the biases in the consumer : 1244721

 

 

21) Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

A) one-half to one percentage point.

B) one to two percentage points.

C) one quarter percentage point.

D) one and one-half percentage points.

 

22) Which of the following would be a consequence of substitution bias in the CPI?

A) Social Security payments would not adequately compensate retired workers for inflation.

B) Businesses would over-compensate employees for inflation when giving the cost of living rises.

C) The inflation rate based on the CPI would under-estimate the true level of inflation.

D) Judges would award child support payments that would not adequately keep up with the true cost of inflation.

 

23) To reduce the bias in the consumer price index, the Bureau of Labor Statistics

A) updates the market basket every two years, rather than every 10 years.

B) updates the market basket every 10 years, rather than every two years.

C) incorporates substitutions by consumers when prices of specific products rise rapidly.

D) incorporates substitutions by consumers when prices of specific products fall rapidly.

 

24) The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index. Which of the following is not one of the steps taken to reduce the bias?

A) using statistical methods to reduce the size of the quality bias

B) updating the market basket every two years, rather than every 10 years

C) incorporating substitutions by consumers when prices of specific products rise rapidly

D) conducting a point-of-purchase survey to track where consumers actually make their purchases

25) The producer price index measures the prices that firms

A) pay for imported natural resources that go into the production process.

B) receive for the goods and services they export.

C) receive for the goods and services they use at all stages of production.

D) pay for labor, whether or not the labor is foreign or domestic.

 

26) The broadest measure of the price level that includes all final goods and services is

A) the producer price index.

B) the consumer price index.

C) the GDP deflator.

D) the wholesale price index.

 

27) The most widely used measure of inflation is based on which of the following price indices?

A) the producer price index

B) the consumer price index

C) the GDP deflator

D) the wholesale price index

 

28) The CPI is also referred to as

A) the GDP deflator.

B) the inflation-consumption index.

C) the cost-of-living index.

D) the producer price index.

 

29) Which of the following is the smallest portion of the market basket of goods that makes up the CPI?

A) housing

B) food and beverages

C) transportation

D) apparel

 

Table 13-7

Year

CPI

(1982-1984 = 100)

2012

175

2013

180

 

30) Refer to Table 13-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2012 and 2013?

A) 2.9%

B) 3.5%

C) 4.6%

D) 5%

E) 7.5%

 

Table 13-8

Year

CPI

(1982-1984 =100)

2012

100

2013

120

 

 

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