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The real interest rate measures the change in dollar amounts.

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A COLA automatically raises the wage when the CPI rises.

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If the real interest rate is 5 percent and the inflation rate is 2 percent,then the nominal interest rate is 7 percent.

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Core CPI is a price index that only looks at the prices of food and energy and ignores the prices of all other goods and services.

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The inflation rate is the absolute change in the price level from the previous period.

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Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

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In comparison to the situation in the late 1970s,the United States experienced lower nominal interest rates and higher real interest rates in the late 1990s.

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Data from the Bureau of Labor Statistics show that the largest category of consumer spending is housing.

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The U.S.income tax system is completely indexed for inflation.

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Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If inflation was 2 percent during the year the money was deposited,then Bob's purchasing power has increased by 3 percent.

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The Bureau of Labor Statistics does not try to account for quality changes in the goods and services in the basket used to compute the CPI.

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The CPI is always 1 in the base year.

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The value of the consumer price index increased from 140 to 147 during 2006.Nathan opened a bank account at the beginning of 2006,and at the end of 2006 his account balance was $12,840.The purchasing power of Nathan's account increased by 2 percent during the year.We can conclude that Nathan opened his account with a deposit of $11,500 at the beginning of 2006.

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When consumer spending is broken down into the major categories of goods and services,the largest single category is spending on transportation.

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The nominal interest rate tells you how fast the number of dollars in your bank account rises over time.

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Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent.A year later,Bob withdraws his $105.If inflation was 7 percent during the year the money was deposited,then Bob's purchasing power has increased by 2 percent.

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Inflation can be measured using either the GDP deflator or the consumer price index.

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There is no longer much debate among economists concerning the severity of and the solution to the problems in using the CPI to measure the cost of living.

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Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive.

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If the value of the consumer price index is 110 in 2005 and 121 in 2006,then the inflation rate is 11 percent for 2006.

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