True or False:
1. An index number is a percent that measures the change in price, quantity, value, or some other item of interest from one time to another.
2. The base period for one index might be 1982-84, while the base period for another index might be 1990.
3. An index is a convenient way of comparing changes for different variables, i.e., average income and food prices.
4.Converting data to indexes makes it easier to compare the trend in a series composed of exceptionally large numbers.
5.The CPI serves only one major function: as an economic indicator of the rate of inflation in the United States.
6.The Laspeyres' method uses the amounts consumed in the base period, q 0, as weights to determine a price index.
7.The base number for most indexes is 1.
8.To construct a special-purpose index designed to measure general business activity, the weights are based on the judgments of the statistician and assigned to each series.
9.To deflate sales, the actual sales are multiplied by the wholesale price index and the result multiplied by 100.
10.Social security, pensions, many apartment leases and many labor contracts are tied to the change in the CPI.
Multiple Choice:
11.If the average hourly earnings in mining in 1978 was $7.67 and for the most recent month it was $14.90, what is the index of hourly earnings for the most recent month based on 1978?
A) 100.00
B)186.9
C)151.5
D)194.3
12.Besides measuring change in the prices of goods and services, the consumer price index has a number of other applications such as:
A)To determine real disposable personal income,
B)To deflate sales or other data series,
C)To find the purchasing power of the dollar
D)Establish cost of living increases.
E)All of the above.
13.The wholesale price of a straight back desk chair in 2002 was $70; in 2003, $80.50; and in 2004, $63.What were the indexes for 2003 and 2004 using 2002 = 100?
A) 115 and 90
B)1.15 and 0.9
C)1150.0 and 900.0
D)87.0 and 111.0
14. Real income is computed by:
A)Dividing money income by the CPI and multiplying by 100.
B)Dividing the CPI by money income and multiplying by 100.
C)Multiplying money income by the CPI.
D)Subtracting the CPI from money income.