Economics Exam 2 Chapters 11/12

The opportunity cost of growth is

a reduction in current consumption.

When a nation has very little income per person

it has the potential to grow relatively quickly due to the "catch-up effect."

Once a country is wealthy,

it may be harder for it to grow quickly because of the diminishing returns to capital

What is the value of the basket in the base year?

$300

What is the inflation rate for 2019?

10.3 percent

What are the values of the CPI in 2017, 2018, and 2019, respectively?

100, 113.3, 125

If inflation is 8 percent and the real interest rate is 3 percent, then the nominal interest rate should be

11 percent

What is the inflation rate for 2018?

13.3 percent

If real income per person in 2018 is $18,073 and real income per person in 2019 is $18,635, what is the growth rate of real income over this period?

3.1 percent

If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is

4 percent

In 1989, the CPI was 124.0. In 1990, it was 130.7. What was the rate of inflation over this period?

5.4 percent

Suppose the base year is changed in the table from 2017 to 2019. Also, suppose that the typical consumption basket was now determined in 2019 (now use the 2019 consumption basket). What is the new value of the CPI in 2018?

90.6

Which of the following describes an increase in technological knowledge?

A farmer discovers that it is better to plant in the spring rather than in the fall

Which of the following statements regarding the impact of population growth on productivity is true?

All of the above are true

Which of the following statements is true?

Countries have great variance in both the level and growth rate of income per person; thus, poor countries can become relatively rich over time

Which of the following expenditures to enhance productivity is most likely to emit a positive externality?

Susan pays her college tuition

Under which of the following conditions would you prefer to be the borrower?

The nominal rate of interest is 20 percent and the inflation rate is 25 percent

Under which of the following conditions would you prefer to be the lender?

The nominal rate of interest is 5 percent and the inflation rate is 1 percent

Which of the following statements is correct?

The real interest rate is the nominal interest rate minus the inflation rate

Which of the following is an example of foreign portfolio investment?

Toyota buys stock in Ford, and Ford uses the proceeds to build a new plant in Michigan

Copper is an example of

a nonrenewable natural resource

Thomas Malthus argued that

an ever-increasing population is constrained only by the food supply, resulting in chronic famines

Which of the following would likely cause the CPI to rise more than the GDP deflator?

an increase in the price of Hondas produced in Japan and sold in the United States

If a production function exhibits constant returns to scale,

doubling all of the inputs doubles output

Inflation can be measured by all of the following except the

finished goods price index

If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected

firms will gain at the expense of workers

The CPI will be most influenced by a 10 percent increase in the price of which of the following consumption categories?

housing

Madelyn goes to college and reads many books while at school. Her education increases which of the following factors of production?

human capital

If Mazda builds a new plant in Illinois,

in the future, U.S. GDP will rise more than U.S. GNP

Which of the following government policies is least likely to increase growth in Africa?

increase restrictions on the importing of Japanese automobiles and electronics

For a given level of technology, we should expect an increase in labor productivity within a nation when there is an increase in each of the following except

labor

If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected

lenders will gain at the expense of borrowers

To increase growth, governments should do all of the following except

nationalize major industries

Our standard of living is most closely related to

our productivity because our income is equal to what we produce

The "basket" on which the CPI is based is composed of

products purchased by the typical consumer

A reasonable measure of the standard of living in a country is

real income per person

Suppose your income rises from $19,000 to $31,000 while the CPI rises from 122 to 169. Your standard of living has likely

risen

If there is an increase in the price of apples that causes consumers to purchase fewer pounds of apples and more pounds of oranges, the CPI will suffer from

substitution bias

The table shows that the 2018 inflation rate is biased upward because of

substitution bias

China, Japan, and Brazil are growing very quickly because

they save and invest an unusually high percentage of their real income