Practice Quiz

ECO 2302-02

Practice for quiz # 2- AK

Chapter 6- The CPI and the cost of living

1- The Consumer Price Index measures the average prices paid by

A) businesses for a fixed market basket of resources.

B) businesses for the most frequently used basket of resources.

C) urban consumers for a fixed market basket of goods and services.

D) urban consumers for the goods and services that most frequently change in price.

E) businesses and consumers for a market basket of goods and services.

Answer: C

2- The base period for the CPI has an index number of

A) 100.

B) 1.

C) 0.

D) 10.

E) 1,000.

Answer: A

3- If the current period has a CPI of 150, then the amount of inflation since the base period is

A) 150 percent.

B) 50 percent.

C) 250 percent.

D) 100 percent.

E) unknown without knowing the base period's CPI.

Answer: B

4- The items included in the CPI are

A) final goods produced in the United States.

B) final goods and services produced in the United States.

C) goods and services consumed by the typical urban household.

D) only goods and services produced within the current year and consumed by the typical household.

E) gods but not services consumed by the typical urban household.

Answer: C

5- According to the CPI basket, the largest item in the households' budgets is

A) food.

B) housing.

C) transportation.

D) education.

E) apparel.

Answer: B

6- Consumers in Infland consume only two goods, magazines and pizzas. If they spend $50 on magazines and $90 on pizzas a month, how many magazines and pizzas are in their CPI market basket if the price of a magazine is $5 and the price of a pizza is $9.

A) 7 magazines and 5 pizzas

B) 10 magazines and 5 pizzas

C) 5 magazines and 7 pizzas

D) 10 magazines and 10 pizzas

E) It is impossible to determine...