301 Chapter 3 Measuring the Cost of Living MULTIPLE CHOICE 1. Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn 200 times as much as Babe Ruth in 1931. However, prices have also risen since 1931. We can conclude that a. the best baseball players today are about 200 times better off than Babe Ruth was in 1931. b. because prices have also risen, the standard of living of baseball stars hasn’t changed since 1931. c. one cannot make judgments about changes in the standard of living based on changes in prices and changes in incomes. d. one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931. ANSWER: d. one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931. TYPE: M DIFFICULTY: 1 SECTION: 11.0 2. When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d. can offset the effects of rising prices by saving more. ANSWER: a. has to spend more dollars to maintain the same standard of living. TYPE: M DIFFICULTY: 1 SECTION: 11.0 3. The consumer price index is used to a. track changes in the level of wholesale prices in the economy. b. monitor changes in the cost of living. c. monitor changes in the level of real GDP. d. track changes in the stock market. ANSWER: b. monitor changes in the cost ...
