Question Details

An example of bias in the CPI measure is 



1. "He claimed that a better measure of Turkish national income could be obtained by including money sent back to their families by Turks living and working in Germany, something that is currently ignored in the national accounts." This income is 
a) included in Turkish GDP b) included in Turkish GNP 
c) included in both Turkish GDP and GNP 
d) completely ignored in the Turkish accounts 
2. "The government insists that the CPI measures consumer prices, not the cost of living. But don't shoot the CPI - whether bringing good news or bad, it's the best messenger we've got." During a typical inflation 
a) the CPI rises by less than the cost of living 
b) the CPI rises by more than the cost of living 
c) the CPI and the cost of living rise by the same amount 
d) there is no consistent relationship between rises in the CPI and in the cost of living 


3. "Note that the percent change in the GDP deflator is being used as the measure of inflation rather than the more familiar CPI. The GDP deflator is a price index that samples _______, not just those paid by consumers." The blank should be 
a) all prices, including imports 
b) prices of all domestically-produced goods and services 
c) prices of all domestically-produced goods and services except exports 
d) prices of all domestically-produced goods and services except those produced by government 3 
4. "The rapid development of computers makes it difficult to determine how much of the change in measured prices of computers is due to pure price change or due to the change in quality of the product. It is clear that the cost of obtaining a given amount of computing capability has been falling." If the national accounts statistician makes proper adjustments, this implies that computers should be causing the CPI to 
a) fall b) rise c) be steady d) move in no predictable direction 
5. "As best we can tell, responded the central bank governor, the center of the 2 percent inflation target, namely 1 percent, appears to correspond to genuine price stability once the various sources of bias in the CPI are allowed for." An example of bias in the CPI measure is that it 
a) ignores import prices b) ignores investment goods 
c) ignores most quality changes d) values government output at cost



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