Question 22(1 point)

Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has been raised by 15 percent, so she decides to buy some peppermint tea instead. Which of the following problems in the construction of the CPI is this situation most relevant to?

Question 22 options:

a)

substitution bias

b)

introduction of new goods

c)

unmeasured quality change

d)

income effect

Question 23(1 point)

The price of imported athletic shoes produced by a Canadian company operating in Thailand increases. By itself, what effect will this change have on the Canadian GDP deflator and CPI?

Question 23 options:

a)

The GDP deflator and the CPI will both increase.

b)

The GDP deflator will increase, but the CPI will be unaffected.

c)

The GDP deflator and the CPI will both be unaffected.

d)

The GDP deflator will be unaffected, but the CPI will increase.

Question 24(1 point)

In 1954, Canadian Prime Minister Louis Stephen St. Laurent was paid a salary of $15 000. Stephen Harper, the Prime Minister in 2012, was paid $157 731. The price index for 1954 is 14.1 and the price index for 2012 is 121.7. What is, approximately, Prime Minister St. Laurent's salary equivalent in 2012 dollars?

Question 24 options:

a)

$110 500

b)

$114 500

c)

$129 500

d)

$211 500

Question 25(1 point)

Mavis Corporation has an agreement with its workers to completely index the wages of its employees to inflation in the CPI. Mavis currently pays its production line workers $10 an hour and is scheduled to index their wages today. If the CPI is currently about 120 and was 100 a year ago, by how much should Mavis increase the hourly wages of its workers?

Question 25 options:

a)

$0.58

b)

$0.65

c)

$1.00

d)

$2.00

Question 26(1 point)

Which of the following best explains whether interest rates are positive or negative?

Question 26 options:

a)

Real interest rates can be either positive or negative, but nominal interest rates cannot be negative.

b)

Real interest rates and nominal interest rates must be positive.

c)

Real interest rates must be positive, but nominal interest rates can be either positive or negative.

d)

Real interest rates and nominal interest rates can be either positive or negative.