AP®︎ Macroeconomics: Topic 2.4 Practice Test
Prepare for your quiz, test, or the AP exam with focused practice questions on Topic 2.4 of AP Macroeconomics – Price Indices and Inflation.
Questions List
Topic 2.4
Question 1 Easy
This question tests the following: MEA-1.F.1
What does CPI stand for?
What You’re Being Tested On:
Explore the learning objectives taken directly from the College Board’s AP® Macroeconomics Curriculum. Ensure you’re prepared for the exact topics covered on the AP® exam, in-class tests, and quizzes, and gain confidence in your mastery of the material.
Topic 2.4: Price Indices and Inflation
Learning Objective: MEA-1.F
a. Define the consumer price index (CPI), inflation, deflation, disinflation, the inflation rate, and real variables. b. Explain how price indices can be used to calculate the inflation rate and to compare nominal variables over time periods. c. Calculate the CPI, the inflation rate, and changes in real variables.
Essential Knowledge: MEA-1.F.1
The consumer price index (CPI) measures the change in income a consumer would need in order to maintain the same standard of living over time under a new set of prices as under the original set of prices.
Essential Knowledge: MEA-1.F.2
The CPI measures the cost of a fixed basket of goods and services in a given year relative to the base year. Exclusion: Calculating the producer price index (PPI) is beyond the scope of the course and AP Exam.
Essential Knowledge: MEA-1.F.3
The inflation rate is determined by calculating the percentage change in a price index, such as CPI or the GDP deflator.
Essential Knowledge: MEA-1.F.4
Real variables, such as real wages, are the nominal variables deflated by the price level.
Learning Objective: MEA-1.G
Define the shortcomings of the CPI as a true measure of inflation.
Essential Knowledge: MEA-1.G.1
The CPI as a measure of inflation has some shortcomings, such as substitution bias, causing it to overstate the true inflation rate.
