Homework#4 Macro

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as

$40.00 purchased in 1975.

Which of the following are excluded from GDP?

All of the choices are excluded from GDP.

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.

If U.S. imports of goods and services exceed exports

GDP in the United States will be less than the sum of consumption, investment, and government purchases.

When there is inflation

GDP increases faster than real GDP.

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

Which of the following are most likely classified by economists as consumer durable goods?

automobiles, furniture

The underground economy

causes GDP to be underestimated.

The largest component of GDP is

consumption.

Per capita real GDP is found by

dividing real GDP by population.

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:

exports exceed imports by $50 billion.

Suppose that GDP rose from $8 trillion to $9 trillion, while the GDP deflator increased from 100 to 120. Real GDP

fell.

When the consumer price index rises, the typical family

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

If more foreign tourists visited the United States, this would

lower our overall trade imbalance.

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy

more milk and more T-shirts.

If total exports exceed total imports, other things being constant, then

net exports are positive.

Economists use the term inflation to describe a situation in which

the economy's overall price level is rising.

In the equation C + I + G + Xn, the I is defined as

total investments in new plant and equipment.

Real GDP is the

value of production of final output in one year after adjusting for changes in prices during the same period.