Practice Quiz - Modules 1 + 2

Choose the correct statement. A. The CPI is just one of many alternative price level index numbers. Your answer is correct. B. The Congressional Advisory Commission on the Consumer Price Index in 1996 said that the CPI overstates inflation by 0.1 percentage points a year. C. A bias in the CPI gives workers with wage contracts linked to the CPI less real income than the firm intended. D. The bias in the CPI eliminates the substitution between different products by consumers.

A

A. In​ 2016, the price of corn fell and some corn farmers will switch from growing corn in 2017 to growing soybeans. Does this fact illustrate the law of demand or the law of​ supply? As the price of corn fell in​ 2016, _________. B. Why would a corn farmer grow​ soybeans?

A. farmers planned to decrease the quantity of corn supplied in 2017. This fact illustrates the law of supply. B. Soybeans and corn can be grown with the same​ resources, so they are substitutes in production.

Oil Price Soars to​ $135 The price of oil hit a record high above​ $135 a barrel in May 2008—more than twice what it cost the year before. OPEC has so far blamed price rises on speculators and says there is no shortage of oil. BBC News Complete the following sentences. A. The price of oil rises if the demand for oil​ ______ and the supply of oil​ ______. B. A shortage in the market for oil implies that​ ______.

A. increases; decreases B. the price of oil is being prevented from influencing buying and selling plans

Choose the correct statement. A. In recent​ years, population growth has outstripped jobs​ growth, resulting in a serious unemployment problem. B. Unemployment is a serious personal problem but not a serious social economic problem. It is only an effect of the business cycle. C. Prolonged unemployment increases a​ person's job prospects because they are willing to work for a lower wage. D. The class of 2017 had a better time in the job market than those of the decade that preceded it.

D

Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption​ expenditure, investment, or government expenditure on goods and​ services: Item 1: The purchase of a new limo for the president Item 2: Aluminum cans bought by CocaCola

Item 1 is​ ______ and item 2 is​ ______. a final good which is government expenditure; an intermediate good

Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption​ expenditure, investment, or government expenditure on goods and​ services: Item 3: New airplanes bought by Southwest Airlines Item 4: A haircut bought by a student

Item 3 is _____ and item 4 is ______. a final good that is investment; a final good that is consumption expenditure

The national accounts of Parchment Paradise are kept on​ (you guessed​ it) parchment. A fire destroys the statistics office. The accounts are now incomplete but they contain the data in the table. Calculate net domestic income at factor cost and the statistical discrepancy. Photo in notes

Net domestic income at factor cost is ​$2,500. The statistical discrepancy is ​$100.

graph

go to notes for photo

Potential GDP per person​ ______.

grows at a steady pace but not at a constant pace

Draw a demand curve for lattes and label the curve. Use any prices and quantities you​ wish, but make your demand curve obey the law of demand. The law of demand states that​ ______, the​ ______ the price of a​ good, the smaller is the quantity demanded.

other things remaining the same; higher

Think of examples of goods whose relative price has risen or fallen by a large amount. In​ 2007, the price of a gallon of gas was​ $2.59. In​ 2017, the price of a gallon of gas was​ $2.32 In​ 2007, the price of a dozen eggs was​ $1.63. In​ 2017, the price of a dozen eggs was​ $1.40. Between 2007 and​ 2017, the relative price of a gallon of gas with respect to a dozen eggs​ _______ and the relative price of a dozen eggs with respect to a gallon of gas​ _______.

rose; fell

A decrease in the supply of golf clubs brings a​ ______ of golf clubs at the original price and a ​______ in their price.

shortage; rise

When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

The graph shows the market for football tickets. Draw a horizontal line at a price at which there is a surplus of football tickets. Label it Price. Draw an arrow that shows the amount of the surplus. A surplus occurs at a given price when​ ______. The price​ _____ to reach equilibrium.

the quantity supplied is greater than the quantity demanded​; falls

Explain why real GDP might be an unreliable indicator of the standard of living. Real GDP might be an unreliable indicator of the standard of living because​ ______.

the standard of living depends on many​ factors, some of which are not part of real GDP

The reference base period for the CPI is​ 1982-1984. In April ​2017, the CPI was 244.5. Complete the sentence. This CPI in April 2017 tells us that the​ ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was​ ______ .

​average; 144.5 percent higher in April 2017 than the average of​ 1982-1984