Economics midterm 3

The CPI in 1930 equaled 0.17. The CPI in 1931 equaled 0.15. The rate of inflation between 1930 and 1931 was

-11.8 percent

A particularly strong expansion is called a

boom

Long-lived goods used for producing other goods and services are called

capital goods

The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the

consumer price index

A nations central bank

controls a nation's monetary policy

Fiscal policy refers to

decisions to determine the government's budget

When government revenue is less than the government spending, the nation had a

government budget deficit

Structural policy refers to

government policies aimed at changing the underlying structure or institutions of the economy

All of the following describe economic conditions during the great depression in the united states except

high rates of inflation

The four categories of the final users of GDP are

households, firms, governments, and the foreign sector

A real quantity is measured

in physical terms

Macroeconomics first developed as a new sub field of economics

in response to the severe economic hardships of the great depression

A nominal quantity is measured

in terms of current dollar value

Goods and services provided by the state and local governments are

included in GDP at cost

If the total expenditures of a typical family equaled $35,000 per year in 2010 and the exact same basket of goods and services cost $40,000 in the year 2015, the family's cost of living

increased by 14 percent

Since 1950, the standard of living in the United States has

increased when measured by both total output and output per person

The price of a gallon of gasoline at the pump increased by 10% at the same time the inflation rate was 5%. The nominal price of gasoline ___, and the real price of gasoline ___

increased, decreased

One family earned an income of $28,000 in 1990. Over the next five years, their income increased by 15%, while the CPI increased by 12%. After five years, this family's nominal income ______, and their real income ______.

increased, increased

When consumers substitute a cheaper food for a more expensive one, the CPI will ___ the change in the cost of living

overstate

When statistics fail to allow for the possibility that consumers switch from products with rising prices to those whose prices are stable or falling, the CPI will tend to ___ the rate of inflation

overstate

The degree to which people have access to goods and services that make their lives easier, healthier, safer, and more enjoyable is called the

standard of living

Decisions to reduce the money supply are made by _____ and are an example of _____ policy

the Federal Reserve; monetary

The shoe leather costs of inflation include all of the following except

the lost purchasing power of cash

Macroeconomic policies are government policies designed to affect

the performance of the economy as a whole

A trade imbalance occurs when

the quantity of a country's exports differs significantly from the quantity of imports

If the CPI equaled 1.00 in 1995 and 1.65 in 2005 and a typical household's income equaled $35,000 in 1995 and $40,000 in 2005, then between 1995 and 2005, real household income

decreased

If workers received a 5 percent wage increase and the rate of inflation was 10 percent, then their real wage

decreased

The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2019, pizzas cost $10 each, jeans cost $40 per pair and milk cost $3 per gallon. In 2020, the price of pizzas went down $8 each while the price of jeans and milk remained the same. Between 2020, a typical family's cost of living

decreased by 4.5 percent

A trade deficit occurs when

exports are less than imports

Goods and services that are consumed by the ultimate user are called ___ goods and services

final

A decrease in the federal income tax is an example of ___ policy

fiscal

If the consumer price index increased from 1.52 to 1.65, then it must be the case that ___ relative to prices in the base year

the weighted average level of prices rose

Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the value added of the corner store?

$0.50

Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the value added of Citrus growers incorporated?

$0.75

Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the value added of Florida Jam Company?

$1.25

Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the sum of the value added of all the firms?

$2.50

If an automobile manufacturer pays $200 for a car windshield, $400 for four car tires, $100 for a car CD player, and sells cars made with these parts for $20,000, then each car the automobile manufacturer sells contributes how much to GDP?

$20,000

In 2019, Pete Rich purchased a 1642 painting by Rembrandt for $20 million. He also paid a 1 percent commission to the auction house that sold the painting. What was the contribution of these transactions to the GDP in the year 2019?

$200,000

If the Citrus Growers Association grows $1 million worth of oranges, sells $500,000 worth of oranges to consumers, uses the rest to make orange juice that is sold to consumers for $3 million, Citrus Grower's contribution to GDP is

$3,500,000

Suppose that the total production of an economy consists of 4 oranges and 10 candy bars, each orange sells for $0.25, and each candy bar sells for $0.50. What is the market value of production in this economy?

$6.00

Suppose that the total expenditures for a typical household in 2018 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2020 was $3,000. If 2018 is the base year, the CPI for 2020 equals

1.20

The CPI in 1974 equaled 0.49. The CPI in 1975 equaled 0.54. The rate of inflation between 1974 and 1975 was

10.2 percent

The CPI in year one equaled 1.45. The CPI in year two equaled 1.51. The rate of inflation between years 1 and 2 was

4.1 percent

Decisions to cut taxes are made by _____ and are an example of _____ policy

Congress; fiscal

Which of the following is not classified as a final good?

Fresh vegetables purchased by a restaurant

Which of the following transactions would be included in the GDP of the United States?

Honda produces cars in Ohio

Normative analysis

addresses the question of whether a policy should be used

Macroeconomists are more likely than microeconomists to deal with

aggregation

Positive analysis

aims at determining only the economic consequences of a particular policy

The additional goods and services produced by women in the United States as their labor force participation increases represent

an increase in economic activity

The CPI is a measure of the

average level of prices relative to prices in the base year

To compare the purchasing power of nominal wages in two different years, one must

deflate both quantities by a common price index

A particularly severe recession is called a

depression

Monetary policy refers to

determination of the nation's money supply

The process of steady increase in the quantity and quality of goods and services the economy can produce is called

economic growth

Macroeconomic issues include all of the following except

energy reserves

If you wish to maintain a constant purchasing power when you retire, you should choose retirement income options that are

indexed

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index if called

indexing

Two methods used to adjust nominal values for inflation are

indexing and deflating

The annual percentage rate of change in the price level is the

inflation rate

The rate at which proves in general are increasing is called the

inflation rate

Government actions designed to affect the performance of the economy as a whole are called

macroeconomic policies

Gross Domestic Product (GDP) equals the ___ of the final ___ produced within a country during a given period of time

market value; goods and services

An increase in interest rates by the Federal Reserve is an example of ____ policy

monetary

Deflating a nominal quantity is the process of dividing a ___ quantity by a ___ in order to express quantity in ___ terms

nominal; price index; real

A drawback of using market values to aggregate the quantities of goods and services produced in an economy is that

not all economically valuable goods and services are bought and sold in markets

average labor productivity equals

output per employed worker

The standard of living in an economy is best measured by

output per person

Average consumption in an economy is best measured by ____ while average productivity in an economy is best measured by ____

output per person, output per worker

Among economists today, the most widely accepted cause of the Great Depression is

poor economic policy making

If Country A and Country B have the same total output, then the standard of living in these two countries can be different depending on

population size

"The plan to create private accounts in Social Security will reduce benefits for some workers," is an example of a ________ statement, while "Social Security will be better if the private accounts are allowed" is an example of a ________ statement

positive; normative

A measure of the average price of a given class of goods or services relative to the price of the same goods and services in a base year is called a

price index

The value added by any firm equals the firm's ___ from selling the product minus ___

revenue, the cost of inputs purchased from other firms

Unemployment typically _______ during a recession

rises

GDP is a measure of an economy's:

total output

The fraction of people who would like to be employed but can find work is called the

unemployment rate

intermediate goods and services are ___ production and ___ counted in GDP

used up in the process of; are not

Great Depression

was a period of low production and high unemployment