Question 16(1 point)

How are the weights on the various goods and services in the CPI basket determined?

Question 16 options:

a)

Each good and service is weighted according to its quantity.

b)

A survey is conducted to determine how much of each good and service typical consumers purchase.

c)

The weights equal the ratio of expenditures on each good or service divided by the total consumption expenditures in the GDP accounts.

d)

Each good and service is weighted according to its price.

Question 18(1 point)

The price index in 2012 is 120, and in 2013 it is 127.2. What is the inflation rate?

Question 18 options:

a)

5 percent

b)

6 percent

c)

7.2 percent

d)

8.4 percent

Question 19(1 point)

What is by far the largest category of goods and services in the CPI basket?

Question 19 options:

a)

shelter

b)

recreation, education, and reading

c)

transportation

d)

food

Question 20(1 point)

What is the goal of the consumer price index?

Question 20 options:

a)

to measure changes in the costs of production

b)

to measure changes in the cost of living

c)

to measure changes in the relative prices of consumer goods

d)

to measure changes in the production of consumer goods

Which of the following is NOT a widely acknowledged problem with the CPI as a measure of the cost of living?

Question 21 options:

a)

substitution bias

b)

introduction of new goods

c)

unmeasured quality change

d)

unmeasured price change