1. In the CPI, goods and services are weighted according to

a. how much a typical consumer buys of each item.

b. whether the items are necessities or luxuries.

c. how much of each item is produced in the domestic economy.

d. how much is spent on them in the national income accounts.

ANSWER: A

POINTS: 0 / 1

2. By not taking into account the possibility of consumer substitution, the CPI

a. understates the standard of living.

b. overstates the cost of living.

c. neither overstates nor understates the cost of living.

d. doesn't accurately reflect the cost of living, but it is unclear if it overstates or understates the

cost of living.

ANSWER: B

POINTS: 0 / 1

3. If the prices of Brazilian-made shoes imported into Canada increases, then

a. both Canada's GDP deflator and it's consumer price index will increase.

b. neither Canada's GDP deflator nor it's consumer price index will increase.

c. Canada's GDP deflator will increase but its CPI will not increase.

d. Canada's consumer price index will increase, but its GDP deflator won't chang

e.

ANSWER: D

POINTS: 0 / 1

4. If increases in the prices of Canadian car insurance causes the CPI to increase by 3 percent, the GDP deflator will likely increase by a. more than 3 percent.

b. 3 percent.

c. less than 3 percent.

d. All of the above are correct.

ANSWER: C

POINTS: 0 / 1

5. The real interest rate tells you

a. how quickly your savings account will grow.