Macroeconomics CPI Quiz Questions and Answers,100% CORRECT
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Macroeconomics CPI
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Macroeconomics CPI
Macroeconomics CPI Quiz Questions and Answers
What is the Consumer Price Index and why is it significant? - Correct Answers The consumer price index (CPI) is a measure of the overall cost of the goods and services bought by a typical consumer. CPI is used to find the inflation rate. The CPI affe...
Macroeconomics CPI Quiz Questions and Answers
What is the Consumer Price Index and why is it significant? - Correct Answers The
consumer price index (CPI) is a measure of the overall cost of the goods and
services bought by a typical consumer. CPI is used to find the inflation rate. The
CPI affects nearly all Americans because of the many ways it is used. It is used as
an economic indicator, as a deflator of other economic series, as a means of
adjusting dollar values.
How is the Consumer Price Index calculated? What is the formula? - Correct
AnswersThe CPI is calculated by dividing the price of basket of goods and services
by the price of basket in base year, then multiple that by 100. To find the price of
the basket of goods and services, you multiply the goods by their prices and add
them up. For example, if you were buying 4 hot dogs and 2 hamburgers, and each
hot dog cost $1 while each hamburger cost $2, it would be ($1per hot dog X 4 hot
dogs) + ($2 per hamburger 2 hamburgers) = $8. So, ($8/$8) X100 = a CPI of 100
What are the problems in measuring the cost of living and why are they
significant? - Correct AnswersSubstitution bias: When prices change form one
year to the next, they do not all change proportionately. Some prices rise more
that others. Consumers respond to these differing prices by buying less of the
goods whose prices have risen less.
What are the problems in measuring the cost of living and why are they
significant? - Correct AnswersIntroduction of new goods: When a new good is
introduced, consumers have more variety from which to choose, and this in turn
reduces the cost of maintaining the same level of economic well-being.
What are the problems in measuring the cost of living and why are they
significant? - Correct AnswersUnmeasured quality change: If the quality of a good
deteriorates from one year to the next, the value of a dollar falls, even if the price
of the good stays the same, because you are getting a lesser good for the same
amount of money.
What is the inflation rate and why is it significant? - Correct AnswersThe inflation
rate is the percentage change in the price index from the preceding period. It is
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