ECON 2 homework

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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

A budget deficit

changes the supply of loanable funds

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the

consumer price index rises much more than does the GDP deflator

In an economy where net exports are zero, if saving rises in some period, then in that period

consumption falls and investment rises

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

consumption of services

Gross domestic product can be measured as the sum of

consumption, investment, government purchases, and net exports.

The traditional view of the production process is that capital is subject to

diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries

if total spending rises from one year to the next then

either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

fails to account for the introduction of new goods

If Mr. Keating quits his job as a teacher to home school his own children, GDP

falls because his market income decreases

GDP is the sum of the market value of the

final goods and services

financial intermediaries are

financial institutions through which savers can indirectly provide funds to borrowers

In recent decades, Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

foreign portfolio investment

In the United States, nominal interest rates were

high in the 1970s and low in the 1990s.

In the actual economy, goods and services are purchased by

households, firms, and the government

The real interest rate tells you

how fast the purchasing power of your bank account rises over time

An understanding of the best ways to produce goods and services is called

technology

Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth?

Nutrition

Which of the following would be excluded from 2019 GDP? The sale of

a home built in 2018 and first sold in 2019

The CPI is calculated

monthly

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Corporate bond, U.S. government bond, municipal bond

A policy that increases saving will

improve economic growth and health outcomes

The value of plant and equipment worn out in the process of manufacturing goods and services is measured by

depreciation

Sam bakes a cake and sells it to Carla for $10. Woody pays Diane $30 to tutor him. In this economy, GDP is

$40

Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is GDP here?

$80

Suppose the consumer price index was 184 in Year 1 and 198.17 in Year 1. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period?

-1.9 percent

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.

Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year.

141 percent

If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was the real gdp

40 billion

Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0.

Country B had the higher level of real GDP and real GDP per person

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in

Mexican GDP, but it is not included in U.S. GDP

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)] × 100

Crowding out occurs when investment declines because

a budget deficit makes interest rates rise

The consumer price index tries to gauge how much incomes must rise to maintain

a constant standard of living

Industrial machinery is an example of

a factor of production that in the past was an output from the production process

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing

The basic tools of supply and demand are

central to macroeconomic analysis as well as to microeconomic analysis

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will

fall and remain lower for a long time

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person

grew, but by less than 12 percent

By far the largest category of goods and services in the CPI basket is

housing

The nominal interest rate tells you

how fast the number of dollars in your bank account rises over time

if an economy's gdp falls, then it must be the case that the economy's

income and expenditure both fall

Gross domestic product measures

income and expenditures

The CPI differs from the GDP deflator in that

increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should

lend support to the invisible hand by maintaining property rights and political stability

Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity

more in the short run than in the long run

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100

After graduation, an American college student moves to Japan to teach English. Her salary is included

only is Japan's GDP

Educated people may generate ideas that increase production. These ideas

produce a return to society from education that is greater than the return to the individual

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity

rises but real GDP per person falls

Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

the consumer price index will increase in the future

Which of the following can be measured by the level of real GDP per person?

the standard of living but not productivity

it is claimed that a secondary advantage of mutual funds is

they give ordinary people access to the skills of professional money managers

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

If the price of Italian shoes imported into the United States increases, then

CPI will increase but GDP deflator will not

Which of the following countries achieved higher economic growth, in part by mandating a reduction in population growth?

China

Which of the following statements accurately describes catch-up growth?

In one generation, China will be one of the richest countries in the world, if China's GDP per person continues to grow 9% per year

Which of the following statements is correct about the relationship between inflation and interest rates

In order to fully understand interest rates, we need to know how to correct for the effects of inflation

When ranking movies by nominal box office receipts, what important fact is overlooked?

Prices, including those for movie tickets, have been rising over time

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Private saving is equal to government expenditures - national saving and private saving are equal when government has a balanced budget

GDP per person tells us the income and expenditure of the

average person in the economy

An increase in the price of bread produced domestically will be reflected in

both the GDP deflator and the consumer price index

Educational attainment tends to be

low in countries with high population growth

Indexation refers to

using a law or contract to automatically correct a dollar amount for the effects of inflation

The producer price index measures the cost of a basket of goods and services

bought by firms

Suppose Japanese-based Toshiba Corporation builds and operates a new computer factory in the United States. Future production from such an investment will

increase U.S. GDP more than it increases U.S. GNP

From 1960 to 1990, in which of the following countries has investment resulted in economic growth sufficiently higher than that in the United States?

south korea

Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has

increased measured GDP by the value added by the restaurant's preparation and serving of the meals

The term economists use to describe a situation in which the economy's overall price level is rising is

inflation

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

productivity

The traditional view of the production process is that capital is subject to

diminishing returns


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