ECON exam 3

The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. If Year 1 is the base year, then the CPI for Year 1 was Year 1 Peaches 11 Pecans 6 Year2 Peaches 9 Pecans 10

100.0

The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. The cost of the basket in Year 1 was Year 1 Peaches 11 Pecans 6 Year2 Peaches 9 Pecans 10

225

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

6 percent.

Which of the following provide benefits to society at large and not just to the person(s) who pursues it?

Both technological knowledge that is a public good and education

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.

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

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.

Out of the following economic statistics, which is the best measure of economic prosperity?

The level of real GDP

GDP is defined as the

value of all final goods and services produced within a country in a given period of time.

Most goods and services produced at home

and most goods and services produced illegally are excluded from GDP.

The catch-up effect refers to the idea that

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

intermediate goods

The consumer price index is used to

monitor changes in the cost of living over time.

Which statistic is usually regarded as the best single measure of a society's economic well-being?

Gross domestic product

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.

Government purchases include spending on goods and services by

federal, state, and local governments.

When the consumer price index rises, the typical family

has to spend more dollars to maintain the same standard of living.

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

housing.

For an economy as a whole

income must equal expenditure

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

inflation

The percentage change in the price level from one period to another is called the

inflation rate

. Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?

The percentage of the labor force that is out of work and differences in average income from country to country

Which of the following is an example of human capital?

The things you have learned this semester

Janet is a farmer. Which of the following are included in her human capital?

What she's learned from experience but not her tractor

An organization that tries to encourage the flow of investment from advanced countries to poor countries is the

World Bank.

If Year 1 is the base year and Year 2 is the following year, then the inflation rate in Year 2 equals

a. [(CPI in Year 2 − CPI in Year 1)/CPI in Year 1] × 100.

Which of the following is the correct formula for calculating the consumer price index?

a. [(price of basket of goods and services in current year − price of basket in base year)/price of basket in base year] × 100

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

bought by firms.

The inflation rate is defined as the

percentage change in the price level from the previous period.

Productivity is the amount of goods and services

produced for each hour of a worker's time. It is linked to a nation's economic policies.

If real GDP doubles and the GDP deflator doubles, then nominal GDP

quadruples.

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

technology

Two common measures of the overall level of prices are

the GDP deflator and the consumer price index.

Economists use the term inflation to describe a situation in which

the economy's overall price level is rising.