Chapter 5
Student: ___________________________________________________________________________
1. The measure of the cost of a standard basket of goods and services in any period relative to the cost of the
same basket of goods and services in the base year is called the:
A. consumption cost calculator.
B. consumption production index.
C. consumer production index.
D. consumer price index.
2. The consumer price index for the current year measures the cost of a standard basket in the ______ year
relative to the cost of the same basket in the ______ year.
A. current; base
B. current; current
C. base; index
D. base; current
3. The CPI is a measure of the:
A. real wage.
B. price of a specific good or service.
C. rate of inflation.
D. average level of prices relative to prices in the base year.
4. Suppose that the total expenditures for a typical household in 2010equaled $2,500 per month, while the cost of
purchasing exactly the same items in 2015 was $3,000. If 2010 is the base year, the CPI for 2010 equals: A. 0.83 B. 1.00 C. 1.20 D. 1.25
5. Suppose that the total expenditures for a typical household in 2010 equaled $5,500 per month, while the cost of
purchasing exactly the same items in 2015 was $6,875. If 2010 is the base year, the CPI for the year 2015 equals: A. 0.80 B. 1.00 C. 1.20 D. 1.25
6. If the total expenditures of a typical family equaled $35,000 per year in 2010 and the exact same basket of
goods and services cost $40,000 in the year 2015, the family's cost of living:
A. increased by 14 percent.
B. decreased by 12.5 percent.
C. decreased by 14 percent.
D. increased by 12.5 percent.
7. The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 2010, the base
year, the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each. In 2015, the typical consumer purchased 15 books for $30 each and 30 hamburgers for $3 each. The consumer price index for 2015 on Planet Econ equals: A. 1.00 B. 1.15 C. 1.25 D. 1.45
8. The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2008,
pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2009, the price of pizzas went down to $8 each, while the prices of jeans and milk remained the same. Between 2008 and 2009, a typical family's cost of living:
A. increased by 4.5 percent.
B. decreased by 4.5 percent.
C. remained the same.
D. decreased by 20 percent.
9. The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2008,
pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2009, the price of pizzas
increased to $14 each, while the price of jeans and milk remained the same. Between 2008 and 2009, a typical family's cost of living:
A. increased by 9 percent.
B. decreased by 9 percent.
C. remained the same.
D. increased by 40 percent.
10. If the consumer price index increased from 1.52 to 1.65, then it must be the case that ______ relative to prices
in the base year.
A. all prices rose
B. the weighted average level of prices rose
C. all prices fell
D. some prices rose and some prices fell
11. The consumer price index measures the cost of:
A. a fixed basket of goods and services.
B. a changing basket of goods and services.
C. all goods and services purchased by consumers.
D. goods and services required to live above the poverty level.
