ECON homework 3

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown below. The base year is 2015 . Refer to Table 23-10. What was this country's real GDP in 2016?

$10,950

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

6 percent

The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.Refer to Table 24-1. What belongs in space C?

8.7%

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study

real GDP

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

the inflation rate

For any given year, the CPI is the price of the basket of goods and services in the

given year divided by the price of the basket in the base year, then multiplied by 100.

In the base year, the GDP deflator is always

100

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was

102.0

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was

102.94

The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.Refer to Table 24-1. What belongs in space D?

12%

A country produces only ice cream and pie. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. Refer to Table 23-9. This country's inflation rate from 2009 to 2010 to the nearest tenth was

13.3%

The table below lists annual consumer price index and inflation rates for a country over the period 2005-2010. Assume the year 2005 is used as the base year.Refer to Table 24-1. What belongs in space A?

154

If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be

2013

The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia's inflation rate in 2006?

24.4 percent

Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

3.3 percent for Canada and 9.1 percent for Mexico

The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013 . Refer to Table 23-6. This country's inflation rate from 2012 to 2013 was

34.8%

The table below reports nominal and real GDP for the U.S. from 1929 to 1932. Refer to Table 23-4. What are the GDP deflator and the inflation rate for 1931?

9.16, -10.3

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.

GDP is not a perfect measure of well being; for example,

GDP fails to account for the quality of the environment

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing

Inflation

Changes in real GDP reflect

Only changes in the amounts being produced

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.

The inflation rate is calculated

by determining the percentage change in the price index from the preceding period.

Real GDP is the yearly production of final goods and services valued at

constant prices

In the calculation of the CPI, books are given greater weight than magazines if

consumers buy more books than magazines.

When the consumer price index rises, the typical family

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

In the CPI, goods and services are weighted according to

how much consumers buy of each good or service.

The consumer price index is used to

monitor changes in the cost of living over time

Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that

one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931.

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