39. To compare the purchasing power of nominal wages in two different years, one must:
A. compare the nominal values.
B. deflate both quantities by a common price index.
C. increase both quantities by the same percentage increase in a price index.
D. adjust both quantities by the real interest rate.
40. The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate
was 5 percent. The nominal price of gasoline _____, and the real price of gasoline _____.
A. increased; also increased
B. increased; decreased
C. increased; did not change
D. decreased; increased
41. The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate
was 15 percent. The nominal price of gasoline _____, and the real price of gasoline _____.
A. increased; also increased
B. increased; decreased
C. increased; did not change
D. decreased; increased
42. The price of a gallon of gasoline at the pump increased by 5 percent at the same time that the inflation rate was
also 5 percent. The nominal price of gasoline _____, and the real price of gasoline _____.
A. did not change; increased
B. did not change; did not change
C. increased; did not change
D. increased; decreased
43. If the CPI equaled 1.00 in 1995 and 1.65 in 2005 and a typical household's income equaled $35,000 in 1995
and $40,000 in 2005, then between 1995 and 2005, real household income:
A. increased.
B. decreased.
C. was constant.
D. may have either increased or decreased.
44. A college graduate in 1972 found a job paying $7,200. The CPI was 0.418 in 1972. A college graduate in 2005
found a job paying $30,000. The CPI was 1.68 in 2005. The 1972 graduate's job paid ______ in nominal terms and ______ in real terms than the 2005 graduate's job.
A. more; less
B. more; more
C. less; more
D. less, less
45. A college graduate in 1972 found a job paying $7,200. The CPI was 0.418 in 1972. A college graduate in 2005
found a job paying $28,000. The CPI was 1.68 in 2005. The 1972 graduate's job paid ______ in nominal terms and ______ in real terms than the 2005 graduate's job.
A. more; less
B. more; more
C. less; more
D. less, less
46. One family earned an income of $28,000 in 1990. Over the next five years, their income increased by 15%,
while the CPI increased by 12%. After five years, this family's nominal income ______, and their real income ______.
A. decreased; also decreased
B. decreased; increased
C. increased; did not change
D. increased; also increased
47. One family earned an income of $28,000 in 1990. Over the next five years, their income increased by 15%,
while the CPI increased by 15%. After five years, this family's nominal income ______, and their real income ______.
A. decreased; also decreased
B. decreased; increased
C. increased; did not change
D. increased; also increased
48. A year's tuition at a state university cost $250 in 1972 when the CPI equaled 0.418. The cost of a year's tuition
at the same state university cost $3,000 in 2005 when the CPI equaled 1.68. The real cost of tuition between 1972 and 2005:
A. increased.
B. decreased.
C. remained constant.
D. may have either increased or decreased.
49. The price of a gallon of gasoline was $0.35 in 1972 when the CPI equaled 0.418. The cost of a gallon of
gasoline was $2.25 in 2005 when the CPI equaled 1.68. The real cost of a gallon of gasoline between 1972 and 2005:
A. increased.
B. decreased.
C. remained constant.
D. may have either increased or decreased.
50. The wage paid to workers measured in terms of real purchasing power is called the:
A. nominal wage.
B. cost of living.
C. minimum wage.
D. real wage.
51. The real wage is the wage:
A. measured in current dollars.
B. required to maintain a minimum standard of living.
C. employers are required to pay workers.
D. measured in terms of purchasing power.
52. If workers received a 5 percent wage increase and the rate of inflation was 10 percent, then their real wage:
A. increased.
B. decreased.
C. remained constant.
D. equaled the nominal wage.
53. If workers received a 5 percent wage increase and the rate of inflation was 3 percent, then their real wage:
A. increased.
B. decreased.
C. remained constant.
D. equaled the nominal wage.
