• Inflation

The inflation rate is defined as

• the percentage change in the price level from the previous period

The inflation rate is

• Answers a and b are both correct

The CPI is a measure of

• the overall cost of goods and services bought by a typical consumer

The CPI is calculated by which of the following agencies?

• the Bureau of Labor Statistics

The CPI is calculated

• Monthly

The statistic used to convert dollar amounts into meaningful measures of purchasing power is called

• the consumer price index.

When the consumer price index rises, the typical family

• has to spend more dollars to maintain the same standard of living

The consumer price index is used to

• monitor changes in the cost of living..

The term inflation is used to describe a situation in which

• the overall level of prices in the economy is increasing.

When the overall level of prices in the economy is increasing, we say that the economy is experiencing

• Inflation

The inflation rate is defined as

• the percentage change in the price level from the previous period

The CPI is a measure of

• the overall cost of goods and services bought by a typical consumer.

The CPI is calculated by which of the following agencies?

• the Bureau of Labor Statistics

The CPI is calculated

• Monthly

When constructing the CPI, the Bureau of Labor Statistics tries to include

• all goods and services that typical consumers buy.

In the CPI, goods and services are weighted according to

• how much consumers buy of each item

How are the weights on the various goods and services in the CPI basket determined?

• A survey is conducted to determine how much of each good and service typical consumers purchase.

In the CPI, the base year is

• the benchmark against which other years are compared, updated each year.

By far the largest category of goods and services in the CPI basket is

• housing.

Categories of U.S. consumer spending, ranked from largest to smallest are:

• housing, transportation, food and beverages, and medical care.

Which of the following makes up the smallest category of consumer spending in the U.S.?

• Apparel

If the cost of housing increases by 20 percent, the CPI is likely to increase by

• about 8 percent.

If the CPI increases from one year to the next, the economy has experienced

• inflation.

The inflation rate is calculated by

• determining the percentage increase in the price index from the preceding period

If the consumer price index was 100 in the base year and 105 the following year, the inflation rate was

• 5 percent.

The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the deflation rate between the first and second year, and between the second and third year?

• 10 percent between the first and second year, 11 percent between the second and third year

Which change in the price index shows the greatest rate of inflation: 100 to 110, 150 to 165, or 180 to 198?

• All changes show the same rate of inflation.

Which change in the price index shows the greatest rate of deflation?

• 150 to 120

About how many goods and services are included in the basket which forms the basis for the consumer price index?

• Thousands

The producer price index measures

• the cost of a basket of goods and services bought by firms.

Changes in the producer price index are often thought to be useful in predicting

• changes in the consumer price index.

The goal of the consumer price index is

• to measure changes in the cost of living.

Which of the following is not a widely-acknowledged problem with the CPI as a measure of the cost of living?

• unmeasured price change

When prices change from year to year,

• they do not all change proportionately.

Which of the problems in the construction of the CPI is best represented by the invention of pocket-sized computers?