ECON 203 Chapter 11 Exam Questions With
Complete Answers
Consumer Price Index - ANSWER A measure of the overall cost of the goods and services
bought by a typical consumer.
Calculated: Price of basket goods in current year / price of basket in base year * 100
Basket - ANSWER Fixed set of consumer products used to find CPI; usually a ratio.
Example: Basket = 4 hot dogs, 2 hamburgers
Inflation Rate - ANSWER The percentage change in the price index from the preceding period
Calculated: (CPI in yr2 - CPI in yr1) / CPI in yr1 * 100
Producer Price Index - ANSWER A measure of the cost of a basket of goods and services
bought by firms.
Indexation - ANSWER The automatic correction by law or contract of a dollar amount for the
effects of inflation.
Nominal Interest Rate - ANSWER The interest rate as usually reported without a correction for
Complete Answers
Consumer Price Index - ANSWER A measure of the overall cost of the goods and services
bought by a typical consumer.
Calculated: Price of basket goods in current year / price of basket in base year * 100
Basket - ANSWER Fixed set of consumer products used to find CPI; usually a ratio.
Example: Basket = 4 hot dogs, 2 hamburgers
Inflation Rate - ANSWER The percentage change in the price index from the preceding period
Calculated: (CPI in yr2 - CPI in yr1) / CPI in yr1 * 100
Producer Price Index - ANSWER A measure of the cost of a basket of goods and services
bought by firms.
Indexation - ANSWER The automatic correction by law or contract of a dollar amount for the
effects of inflation.
Nominal Interest Rate - ANSWER The interest rate as usually reported without a correction for
