For purposes of calculating the CPI, the food & beverages category of consumer spending includes the cost of
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both food away from home and alcoholic beverages.
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The consumer price index is used to
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monitor changes in the cost of living over time.
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The GDP Deflator reflects
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the prices of all final goods and services currently produced domestically, while the CPI reflects the price of a fixed basket of goods and services purchased by a typical consumer.
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The consumer price index is
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a useful measure, but not a perfect measure, of the cost of living.
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The CPI is a measure of the overall cost of the goods and services bought by
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a typical consumer.
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Which is the most accurate statement about the GDP deflator and the consumer price index?
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The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year.
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The goal of the consumer price index is to measure changes in the
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cost of living.
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When box office receipts are not corrected for inflation,
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Gone with the Wind does not rank as one of the 50 most popular movies of all time.
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The consumer price index tries to gauge how much incomes must rise to maintain
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a constant standard of living.
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Which entity within the U.S. government is responsible for computing and reporting the CPI?
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the Department of Labor
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The consumer price index is used to
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turn dollar figures into meaningful measures of purchasing power.
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By far the largest category of goods and services in the CPI basket is
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housing.
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The economy's inflation rate is the
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percentage change in the price level from the previous period.
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The CPI is a measure of the overall cost of the goods and services bought by
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a typical consumer.
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Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called
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substitution bias.
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One of the differences between the GDP deflator and the consumer price index is
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the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.
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The inflation rate is calculated
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by determining the percentage change in the price index from the preceding period.
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Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?
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The real interest rate is the nominal interest rate minus the rate of inflation.
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Changes in the producer price index are often thought to be useful in predicting changes in
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the consumer price index.
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For purposes of calculating the CPI, the housing category of consumer spending includes the cost of
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All of the above are correct.
Shelter, Fuel & Furnishings
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The real interest rate tells you
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how fast the purchasing power of your bank account rises over time.
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One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called
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substitution bias.
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When the overall level of prices in the economy is increasing, economists say that the economy is experiencing
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inflation.
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When the consumer price index rises, the typical family
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has to spend more dollars to maintain the same standard of living.
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The price index that measures the cost of a basket of goods and services bought by firms is called the
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producer price index.
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The producer price index measures the cost of a basket of goods and services
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bought by firms.
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The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:
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Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.
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Economists use the term inflation to describe a situation in which
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the economy's overall price level is rising.
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When box office receipts are not corrected for inflation, the most popular movie of all time is
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Avatar.
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Which of the following agencies calculates the CPI?
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the Bureau of Labor Statistics
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The primary purpose of measuring the overall level of prices in the economy is to
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allow for the comparison of dollar figures from different points in time.
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The real interest rate tells you
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how fast the purchasing power of your bank account rises over time.
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When box office receipts are corrected for inflation, the most popular movie of all time
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Gone With the Wind.
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In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the
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consumer price index rises much more than does the GDP deflator.
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The inflation rate is calculated
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by determining the percentage increase in the price index from the preceding period.
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The GDP deflator reflects the
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current level of prices relative to the level of prices in the base year.
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A COLA automatically raises the wage when
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the consumer price index increases.
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In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by
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surveying consumers.
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An important difference between the GDP deflator and the consumer price index is that
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the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers.
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Indexation refers to
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using a law or contract to automatically correct a dollar amount for the effects of inflation.
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The inflation rate is calculated
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by determining the percentage change in the price index from the preceding period.
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The CPI is calculated
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monthly by the Bureau of Labor Statistics.
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The term inflation is used to describe a situation in which
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the overall level of prices in the economy is increasing.
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The CPI is a measure of the overall cost of
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the goods and services purchased by a typical consumer.
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