宏观经济学课件：2 cost of living11.pptVIP

Exercise I 1. In the calculation of the CPI, coffee is given greater weight than tea if A. consumers buy more coffee than tea. B. the price of coffee is higher than the price of tea. C. it costs more to produce coffee than it costs to produce tea. D. coffee is more readily available than tea is to the typical consumer.  2. Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket’s cost was $50; in 2004, the basket’s cost was $52; and in 2006, the basket’s cost was $54.60. The value of the CPI in 2006 was A. 91.6. B. 104.6. C. 109.2. D. 154.6.  3. If the CPI was 110 this year and 100 last year, then A. the cost of the CPI basket of goods and services increased by 110 percent this year. B. the price level increased by 10 percent this year. C. the inflation rate for this year was 10 percent higher than the inflation rate for last year. D. All of the above are correct. 4. Because the CPI is based on a fixed basket of goods, substitution bias causes the index to a. overstate the increase in the cost of living from one year to the next. b. ignore any increase in the cost of living from one year to the next. c. understate the increase in the cost of living from one year to the next. d. sometimes understate, and sometimes overstate the increase in the cost of living from one year to the next. 5. Suppose lawn mowers are part of the market basket used to compute the CPI. Suppose also that the quality of lawn mowers improves while the price of lawn mowers stays the same. If the Bureau of Labor Statistics is able to precisely adjust the CPI for the improvement in quality, then, other things equal, A. the CPI will rise. B. the CPI will fall. C. the CPI will stay the same. D. lawn mowers will no longer be included in the market basket. ? ? The GDP Deflator Versus the Consumer Price Index They are both measures of inflation used by economist to monitor the level of prices in the ec