ECON CHAPTER 12

What is Uganda's real GDP if its nominal GDP is $27.5 billion (in current US$), and the GDP deflator is 163.4? $27.5 billion $12.4 billion $16.8 billion $44.9 billion

$16.8 billion

In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars? $18,865 $7,799 $12,130 $16,259

$18,865

Suppose that the consumer price index in Eastlandia rises from 150 to 159 over the past year, and that the city sets its car registration prices so that real prices stay the same. If the cost to register a car was $50 last year, how much would it cost this year, in nominal terms? $59 $50 $56 $53

$53 because: 50/ 150 = .33 .33 (159)

In 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four-year degree in current dollars? $9,422 $8,746 $1,410 $227

$8,746

You purchase a certificate of deposit that earns an advertised rate of 1.75% interest per year. What is your real rate of return if the actual inflation rate is 1.9%? -0.15% 0.15% 1.75% 3.65%

-0.15%

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return? 0.85% 1.25% -2.1% -0.85%

0.85%

Consider the following basket of goods: 50 bottles of milk, 100 avocadoes, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. What is the inflation rate between last year and this year? 10.13% 8.99% -9.09% -10%

10.13%

What is Sri Lanka's GDP deflator if its nominal GDP is $88.9 billion (in current US$) and the real GDP is $59.34 billion? 100 136.5 66.7 149.8

149.8

What is the value of Apple's 2018 revenue in 2014 dollars? (In 2014, the CPI was 236.7, and in 2018, it was 251.1.) Revenue from 2018 in 2014 dollars =

251.7

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 2006? 1.64% 3.81% 3.22% 2.87%

3.22%

What is the real growth rate of Apple's revenue from 2014 to 2018? Growth in Revenue from 2014 to 2018 =

37.5

In 2014, Apple's revenue was $183 billion, and it grew to $267 billion in 2018. Nominal Growth Rate from 2014 to 2018 =

45.9

If a bundle of goods used to calculate the consumer price index rises from $80 to $86 over a one-year period, what is the inflation rate for that year? 6.0% 7.5% 6.9% 10%

7.5% because 86/80 (100) - 100

Which of the following forms of money would best represent fiat money? A $20 bill printed in 2015. A rare baseball card given to a landlord in place of rent. An hour-long golf lesson given in exchange for an hour of tutoring in economics. Silver quarters made prior to 1965.

A $20 bill printed in 2015.

Which of the following shows the medium of exchange function of money? Mena saves his money in a certificate of deposit at the bank. Darius goes window shopping. Wilma wants to sell her old car, and she values it at $2,400. Daniela goes to the store and purchases roses with U.S. dollars.

Daniela goes to the store and purchases roses with U.S. dollars.

Which of the following correctly shows the steps needed to calculate the inflation rate? Collect prices from the stores where people shop, assess the substitution that people make from low inflation to high inflation products, and calculate the difference in the prices that people pay. Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate. Tally up the cost of the basket of goods and services, subtract the value of goods and services that are no longer counted in the basket, and then calculate the inflation rate. Find the total value of the basket of goods and services, assess quality changes from one period to the next, and measure the inflation rate.

Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.

There is much debate about whether the U.S. government should eliminate the penny from circulation and instead round all prices to the nearest 5 cents for everyday cash transactions. Which function of money does a penny not serve well? Medium of exchange Unit of account Store of value The penny does not serve any of the functions of money well.

Medium of exchange

From 2015 to 2016, the overall price level rose from 200 to 220. Over the same period, tuition rates at the local community college rose from $100 to $115 per credit hour. What can be concluded from the rise in tuition relative to overall inflation? Tuition rates increased at the same rate as inflation. Tuition rates increased at a slower rate than inflation. Tuition rates increased at a faster rate than inflation. Tuition rates and inflation cannot be compared with the numbers given.

Tuition rates increased at a faster rate than inflation. inflation = 220/200 = 1.1 (100)-100 = 10 115- 100 = 1.15 (100)-100 = 15

In which situation is the real value of 1 unit of currency the highest? a Big Mac that costs $4.75 in New York City a Big Mac that costs 4 pounds in London a Big Mac that costs 7 Swiss Francs in Zurich a Big Mac that costs 450 yen in Tokyo

a Big Mac that costs 4 pounds in London

In 2008, the rate of inflation was 2%, which then rose to 3% in 2009 before falling back to 2% in 2010. Between 2008 and 2009, the economy experienced _____ and between 2009 and 2010, the economy experienced _____. a) inflation; disinflation b) inflation; deflation c) disinflation; inflation d) disinflation; deflation

a) inflation; disinflation

Suppose that the CPI in 2013 was 250 and the CPI in 2014 was 260. What is the rate of inflation in this economy? a) 3.8% b) 4.0% c) 10.0% d) 96.2%

b) 4.0%

Which of the following might cause the real value of money to rise in an economy? a) The government prints $1 million in new bills to finance its spending. b) The average price of food items rise by 20%. c) The price of houses and apartment rentals falls by 30%. d) Other countries in the world demand less of this money.

c) The price of houses and apartment rentals falls by 30%.

A popular teacher hands out candy bars to her students as an incentive for good behavior. If students choose to, they could then trade one candy bar for a sheet of stickers or two candy bars to skip a quiz. In this classroom, the teacher is using candy bars as a form of: a) barter. b) commodity money. c) fiat money. d) yummy money.

commodity money.

Hyperinflation is: a period of high money growth in an economy. very high rates of economic growth. extremely high rates of inflation. inflation that occurs when the economy is in a recession.

extremely high rates of inflation.

If the inflation rate was 1% in 2014, 3% in 2015, and 2% in 2016, this economy experienced ____ from 2014 to 2015, and ____ from 2015 to 2016. disinflation; inflation disinflation; deflation inflation; disinflation inflation; deflation

inflation; disinflation

Menu costs are the: marginal costs of adjusting prices. total costs of producing goods and services. variety of costs that cause producers to change their prices. costs of producing restaurant meals

marginal costs of adjusting prices.

The country of Eggville uses eggs as its official form of currency. All prices in Eggville are shown in terms of eggs, and residents carry around baskets of eggs to buy goods and services. Residents, however, cannot save eggs because they end up spoiling. Which functions of money do eggs serve? medium of exchange and store of value unit of account and store of value medium of exchange, unit of account, and store of value medium of exchange and unit of account

medium of exchange and unit of account

Which of the following lists the functions of money? medium of exchange, store of value, and unit of account medium of exchange, measure of inflation, and benchmark of quality store of value, store of interest, and buffer against inflation carrier of exchange, unit of account, and measure of inflation

medium of exchange, store of value, and unit of account

The real interest rate is the: nominal interest rate plus the rate of inflation. economic growth rate adjusted for the effects of inflation. percentage of the nominal interest that is inflation. nominal interest rate minus the rate of inflation.

nominal interest rate minus the rate of inflation.

Suppose that the cost of a loaf of bread in Zanadoo is 20 shillings, and this represents a full day's wages for the typical factory worker. The 20 shillings represents a ____ value, whereas the loaf of bread costing a full day's wage represents a ____ value. real; real real; nominal nominal; nominal nominal; real

nominal; real

If you see that the consumer price index this year is lower than the consumer price index last year, this means that: the consumer price index is lower than the producer price index. on average, prices went down across the economy. the prices of each and every good and service went down. economic growth also decreased.

on average, prices went down across the economy.

If you see that inflation between last year and this year is 3%, this means that: economic growth is also 3%. the prices of each and every good and service went up by 3%. the consumer price index rose by 3% more than the producer price index. on average, prices went up across the economy by 3%.

on average, prices went up across the economy by 3%.

The GDP deflator is an index that tracks the: price that businesses pay over time for the inputs used in the production process. highest prices consumers pay over time for imported goods and services. price of all goods and services produced domestically. average price that consumers pay over time for a representative basket of goods and services.

price of all goods and services produced domestically.

Money illusion is the: illusion that one's earnings this year are higher than they were last year. increase in the amount of money that it takes to purchase goods and services when prices rise. tendency to focus on nominal values instead of inflation-adjusted values. inability to understand that prices always rise.

tendency to focus on nominal values instead of inflation-adjusted values.