Tackle the Test: Multiple-Choice Questions

1. Question

   If the cost of a market basket of goods increases from $100 in year 1 to $108 in year 2, the consumer price index in year 2 equals if year 1 is the base year.

   A.

   8

   B.

   10

   C.

   100

   D.

   108

   E.

   110

   If the cost of a market basket of goods increases from $100 in year 1 to $108 in year 2, the consumer price index in year 2 equals if year 1 is the base year.

2. Question

   If the consumer price index increases from 80 to 120 from one year to the next, the inflation rate over that time period was

   A.

   20%

   B.

   40%

   C.

   50%

   D.

   80%

   E.

   120%

   If the consumer price index increases from 80 to 120 from one year to the next, the inflation rate over that time period was

3. Question

   Which of the following is true of the CPI?

   
   

   
   

   1. It is the most common measure of the price level.

      
      
   
   

   2. It measures the price of a typical market basket of goods.

      
      
   
   

   3. It currently uses a base period of 1982–1984.
      

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   Which of the following is true of the CPI?

4. Question

   The value of a price index in the base year is

   A.

   0.

   B.

   100.

   C.

   200.

   D.

   the inflation rate.

   E.

   the average cost of a market basket of goods.

   The value of a price index in the base year is

5. Question

   If your wage doubles at the same time as the consumer price index goes from 100 to 300, your real wage

   A.

   doubles.

   B.

   falls.

   C.

   increases.

   D.

   stays the same.

   E.

   cannot be determined.

   If your wage doubles at the same time as the consumer price index goes from 100 to 300, your real wage