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


A) 80 to 100
B) 100 to 120
C) 150 to 170
D) 200 to 220

E) All of the above
F) A) and B)

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Which statement best describes the evolution of the GDP deflator and the consumer price index over the past decades?


A) In the late 1970s, the late 1980s, and the early 1990s, the GDP deflator showed high rates of inflation while the consumer price index showed low rates of inflation.
B) In the late 1970s, both the GDP deflator and the consumer price index showed high rates of inflation, and in the late 1980s and the early 1990s, both measures showed low inflation.
C) In the late 1970s, both the GDP deflator and the consumer price index showed low rates of inflation, and in the late 1980s and the early 1990s, both measures showed high rates of inflation.
D) In the late 1970s, the late 1980s, and the early 1990s, both the GDP deflator and the consumer price index showed high rates of inflation.

E) B) and D)
F) C) and D)

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For the average Canadian consumer, what percentage of total consumption does shelter and food expenditures make up, respectively?


A) 27.2, 16.2
B) 14.1, 17.5
C) 19.3, 18.1
D) 16.6, 19.7

E) C) and D)
F) A) and D)

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How often does the basket of goods in the consumer price index change?


A) occasionally, as does the basket of goods used to compute the GDP deflator
B) yearly, as does the basket of goods used to compute the GDP deflator
C) occasionally, while the basket of goods used to compute the GDP deflator changes yearly
D) yearly, while the basket of goods used to compute the GDP deflator changes occasionally

E) C) and D)
F) All of the above

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The inflation rate is computed as 100 × (the current year CPI - the CPI of the previous year) ÷ the CPI of the previous year.

A) True
B) False

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If the current-year CPI is 140, then, since the base year, the price level has increased 40 percent.

A) True
B) False

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In Canada, if the price of imported oil rises so that the price of gasoline and heating oil rise, what happens to the GDP deflator and the consumer price index?


A) The GDP deflator rises much more than the consumer price index rises.
B) The consumer price index rises much more than the GDP deflator rises.
C) The GDP deflator and the consumer price index rise by about the same amount.
D) The consumer price index rises slightly more than the GDP deflator rises.

E) A) and B)
F) C) and D)

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Compute how much each of the following is worth in terms of today's dollars using 197 as the price index for today. a. In 1936, the CPI was 17.7 and the price of a movie ticket was $0.25 b. In 1942, the CPI was 13.1 and a cook earned $15.00 a week c. In 1953, the CPI was 17.4 and a litre of gas cost $0.06

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a. The movie ticket is worth $0.25 × 197...

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The 2019 CPI was 225 and the 1982 CPI was 96.5. How much would you need in 2019 in order to buy what you were able to buy with the $1000 in 1982?


A) $960.00
B) $1777.77
C) $1834.20
D) $2331.61

E) B) and D)
F) None of the above

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


A) 100 to 115
B) 150 to 180
C) 180 to 210
D) 220 to 255

E) All of the above
F) A) and C)

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The Canadian income tax system is indexed to the CPI.

A) True
B) False

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Jake loaned Elwood $6000 for one year at a nominal interest rate of 12 percent. After Elwood repaid the loan in full, Jake complained that he could buy 5 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $6000. What was the rate of inflation during the year?


A) 2.5 percent
B) 7.0 percent
C) 8.0 percent
D) 17.0 percent

E) All of the above
F) A) and B)

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Which price changes when an inflation rate is calculated using the CPI?


A) all prices
B) the prices of all final goods and services
C) the prices of all consumer goods
D) the prices of some consumer goods

E) All of the above
F) A) and B)

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When the relative price of a good increases, how will consumers respond?


A) by buying more of it and its substitutes
B) by buying less of it and its substitutes
C) by buying less of it and more of its substitutes
D) by buying more of it and less of its substitutes

E) B) and D)
F) A) and B)

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Suppose that dairy products have risen in price less than prices in general over the past several years. Which problem in the construction of the CPI is this price increase most relevant to?


A) substitution bias
B) introduction of new goods
C) unmeasured quality change
D) income bias

E) B) and D)
F) A) and B)

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Why does the GDP deflator give a different rate of inflation than the CPI does?

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The GDP deflator and the CPI differ in t...

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From October 2018 to October 2019, the CPI in country A rose from 116.5 to 119.8. In country B, it rose from 97.2 to 102.3. What were the inflation rates in the two countries?


A) 3.3 percent in A and 6.7 percent in B
B) 3.3 percent in A and 5.2 percent in B
C) 2.8 percent in A and 6.7 percent in B
D) 2.8 percent in A and 5.2 percent in B

E) C) and D)
F) B) and D)

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If the prices of New Zealand wool blankets imported into Canada increase, what happens to the GDP deflator and the CPI?


A) The GDP deflator does not change; the CPI decreases.
B) The GDP deflator decreases; the CPI increases.
C) The GDP deflator and the CPI decrease.
D) The GDP deflator does not change; the CPI increases.

E) None of the above
F) B) and D)

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What is the basket of goods used to construct the CPI?


A) a random sample of all goods and services produced in the economy
B) the goods and services typically bought by consumers, according to Statistics Canada surveys
C) goods and services weighted by the ratio of expenditures on them relative to the consumption component of GDP
D) the average price of goods and services in each major category of consumer expenditures

E) A) and D)
F) C) and D)

Correct Answer

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Which situation is described by the term "inflation"?


A) The overall level of prices in the economy is increasing.
B) Incomes in the economy are increasing.
C) Stock market prices are rising.
D) Nominal interest rates in the economy are rising.

E) B) and D)
F) A) and B)

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