ECO 2305 Test 3
In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015?
$1450
If in some year nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?
$15 billion.
In the economy of Talikastan in 2015, consumption was $600, exports were $300, GDP was $1300, government purchases were $250, and investment was $300. What were Talikastan's imports in 2015?
$150
In the economy of Talikastan in 2015, consumption was $6000, exports were $1000, GDP was $10,000, government purchases were $1800, and imports were $1200. What was Talikastan's investment in 2015?
$2400
Ryan lives in an apartment where he pays $7,000 a year in rent. Sarah lives in a house that could be rented for $21,000 a year. How much do these housing services contribute to GDP?
$28,000
Which of the following is the correct formula for calculating the inflation rate?
(CPI in year 2 - CPI in year 1/CPI in year 1) X 100
Which of the following is the correct formula for calculating the consumer price index?
(Price of basket of goods and services in current year/price of basket in base year) X 100
Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was
- 100 in 2012. - 105 in 2013. - 109.5 in 2014.
Which of the following is included in the consumption component of GDP?
- household purchases of appliances. - household purchases of medical care. - household purchases of food. - All of the above are included in the consumption component of GDP
Which of the following is a determinant of productivity?
- human capital per worker - physical capital per worker - natural resources per worker
Both Arnold and Will work 10 hours a day. Arnold can produce six baskets of goods per hour while Will can produce four baskets of the same goods per hour. It follows that Arnold's
- productivity is greater than Will's. - output is greater than Will's. - standard of living is higher than Will's
GDP is equal to
- the market value of all final goods and services produced within a country in a given period of time. - Y - C + I + G + NX.
In the economy of Talikastan in 2015, consumption was $1000, GDP was $1950, government purchases were $500, and investment was $700. What were Talikastan's net exports in 2015?
-$250
In one day Portal Computer Company made 400 laptops with 1200 hours of labor. What was its productivity?
1/3 laptop per hour
Last year real GDP in the imaginary nation of Populia was 907.5 billion and the population was 3.3 million. The year before real GDP was 750 billion and the population was 3 million. What was the growth rate of real GDP per person during the year?
10 percent
In the base year, the GDP deflator is always
100
If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced
11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.
If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator?
250.
The price index was 120 in 2012 and 126 in 2013. What was the inflation rate in 2013?
5.0 percent
If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is
96.1 so prices are lower than in the base year
Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 10 percent for 2014?
CPI in 2013 = 210; CPI in 2014 = 231
Which of the following is a correct way to measure productivity?
Divide the quantity of output by the number of hours worked.
T/F: An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.
False
T/F: CPI = (Price of basket goods and services in base year/Price of basket in current year) X 100
False
T/F: Economists use the term inflation to describe a situation in which the economy's overall production level is rising.
False
T/F: 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.
False
T/F: Nominal GDP uses constant base-year prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services.
False
T/F: When an American doctor opens a practice in Canada, his production there is part of U.S. GDP.
False
T/F: While GDP includes tangible goods such as books and bug spray, it excludes intangible services such as the services provided by teachers and exterminators.
False
Which of the following lists contains, in this order, natural resources, human capital, and physical capital?
For a furniture company: wood, the skills and knowledge of its workers, saws.
GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is
GDP per person
Each day Sue works 8 hours and produces 7 units of goods and services. Mary works 10 hours each day and produces 10 units of goods and services. It follows that
Mary's productivity is higher than Sue's.
Which of the following represents a transfer payment?
The government sends your grandfather his Social Security check
In order for the standard of living within a country to be enhanced over time, which of the following is essential?
The level of productivity must increase.
Which of the following is included in Singapore's GDP?
The value of production by an American working in Singapore
In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?
The value of the consumer price index is always 100 in the base year.
T/F: Consumer Price Index (CPI) = (Price of basket of goods and services in current year/Price of basket in base year) X 100
True
T/F: GDP excludes the value of intermediate goods because their value is included in the value of final goods
True
T/F: In the United States in 2010 real GDP per person was about $47,000, while in some poor countries real GDP per person was less than $5,000
True
T/F: Inflation can be measured using either the GDP deflator or the consumer price index.
True
T/F: Real GDP is a better gauge of economic well-being than is nominal GDP
True
T/F: Real GDP per person tells us the income and expenditure of the average person in the economy
True
T/F: Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive
True
T/F: The Bureau of Labor Statistics is part of the U.S. Department of Labor
True
T/F: The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.
True
T/F: The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.
True
T/F: The group of goods and services used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not.
True
T/F: The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.
True
Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?
Why do wages differ across industries?
Which of the following is not a question that macroeconomists address?
Why does the price of oil rise when war erupts in the Middle East?
A transfer payment is
a form of government spending that is not made in exchange for a currently produced good or service
A basic principle of economics is that a country's standard of living depends on its
ability to produce goods and services
In a simple circular-flow diagram, total income and total expenditure are
always equal because every transaction has a buyer and a seller.
Most goods and services produced at home
and most goods and services produced illegally are excluded from GDP
Changes in nominal GDP reflect
both changes in prices and changes in the amounts being produced.
An increase in the price of bread produced domestically will be reflected in
both the GDP deflator and the consumer price index.
For the purpose of calculating GDP, investment is spending on
capital equipment, inventories, and structures, including household purchases of new housing
Which of the following is not included in GDP?
carrots grown in your garden and eaten by your family
The consumption component of GDP includes spending on
durable goods, nondurable goods, and services
Macroeconomists study
economy-wide phenomena.
Social Security payments are
excluded from GDP because they do not reflect the economy's production
Net exports equal
exports minus imports
Productivity is defined as the quantity of
goods and services produced from each unit of labor input.
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
gross domestic product
Which of the following measures how the level of well-being in a country has changed over time?
growth rate of real GDP per person.
When the consumer price index rises, the typical family
has to spend more dollars to maintain the same standard of living
In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are
housing, transportation, and food & beverages
Matt is going to college to become a pharmacist. What he learns about existing information increases
human capital but not technological knowledge
Grapes are considered intermediate goods
if the purchaser uses them to make wine to sell others but not if the purchaser eats them.
Gross domestic product measures
income and expenditures.
The term economists use to describe a situation in which the economy's overall price level is rising is
inflation
Japan's status as a rich nation is attributable to
international trade, but not to Japan's domestic quantities of natural resources.
Human capital is the
knowledge and skills that workers acquire through education, training, and experience.
The consumer price index is used to
monitor changes in the cost of living over time
The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called
natural resources
Suppose an economy's production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,
nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.
The GDP deflator is the ratio of
nominal GDP to real GDP multiplied by 100
Unemployment compensation is
not part of GDP because it is a transfer payment.
Changes in the GDP deflator reflect
only changes in prices
Changes in real GDP reflect
only changes in the amounts being produced
Which of the following transactions is not included in GDP?
oranges sold by a farmer to a grocery store.
The inflation rate is defined as the
percentage change in the price level from the previous period
The equipment and structures available to produce goods and services are called
physical capital
The one variable that stands out as the most significant explanation of large variations in living standards around the world is
productivity.
Consumption consists of spending by households on goods and services, with the exception of
purchases of new houses.
A nation's standard of living is best measured by its
real GDP per person
One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called
substitution bias.
In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by
surveying consumers
Amy discovers a new way to produce water heaters so they are less expensive and use less natural gas. Amy's discovery is
technological knowledge
An understanding of the best ways to produce goods and services is called
technology
Which of the following agencies calculates the CPI?
the Bureau of Labor Statistics
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
the CPI better reflects the goods and services bought by consumers
Two alternative measures of the overall level of prices are
the GDP deflator and the consumer price index
A decrease in the price of domestically produced nuclear reactors will be reflected in
the GDP deflator but not in the consumer price index.
One of the differences between the GDP deflator and the consumer price index is
the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.
In 1870, the richest country in the world was
the United Kingdom.
Which of the following is an example of physical capital?
the computer a secretary uses
If the price of Italian shoes imported into the United States increases, then
the consumer price index will increase, but the GDP deflator will not increase.
Economists use the term inflation to describe a situation in which
the economy's overall price level is rising
The CPI is a measure of the overall cost of
the goods and services purchased by a typical consumer.
What basket of goods and services is used to construct the CPI?
the goods and services that are typically bought by consumers as determined by government surveys
When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?
the prices of the goods and services
A nation's standard of living is determined by
the productivity of its workers
Which of the following is included in government purchases?
the services of a U.S. government attorney valued at the cost of her salary
Which of the following is a part of your economics professor's human capital?
the things she learned at some prestigious university
GDP is defined as the
value of all final goods and services produced within a country in a given period of time.