Consumer Price Index
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CPA Auditing and Attestation (AUD) › Consumer Price Index
All of the following are components of the formula used to calculate gross domestic product except:
Gross investment
Government spending
Household income
Foreign net export spending
Explanation
GDP calculated through the expenditure approach includes all of the following except household income.
What does the consumer price index measure?
Rate of inflation
Prime rate of interest
Cost of capital
Average household income
Explanation
The CPI is a measure of the inflation rate (the percentage change of the consumer price index from one period to the next.)
Which of the following is correct regarding the CPI for measuring the estimated decrease in a company's buying power?
The CPI measures what consumers will pay for items
The CPI is measures once every 10 years
The products a company buys should differ from what a consumer buys
The CPI is skewed by foreign currency transactions
Explanation
The CPI measures the costs of a market basket of specific goods commonly purchased by consumers.
The CPI rises from 131 in year 1 to 136.5 in year 2. What is the annual inflation rate?
1.38%
4.20%
13.80%
3%
Explanation
(136.5-131)/131 * 100 = 4.2%
If the nominal interest rate is 10% and the rate of inflation is 5%, the real interest rate is:
2%
5%
50%
15%
Explanation
The real interest rate is equal to the nominal interest rate minus inflation.
Under perfect or pure competition, ____ suppliers and customers act independently and there are ____ barriers to entry.
Plenty of, no
No, plenty of
Plenty of, plenty of
No, no
Explanation
Under perfect or pure competition, plenty of suppliers and customers act independently and there are no barriers to entry.