ECO2013 EXAM2- Requires Respondus LockDown Browser

A candy bar had a price of $1.00 in 2014. Assuming you know the value of the CPl in 1962 and the value of the CPl in 2014, which of the following is the correct method for finding the price of the 2014 candy bar measured in 1962 dollars? $

$ 1.00 x ( CPI 1962 / CP2014 )

Inventory investment is negative

. current sales are greater than current production.

Consider the following information about an economy

106,000

You lend $1,000 to a friend and he agrees to pay you back the $1,000 year plus he will pay you interest of 8 % . Next year your must pay you back a total of $ 1080 If the inflation rate is 3 % , then in real terms how much extra money will you have after your friend pays you back?s 50

1080 50

Social security benefits are indexed for inflation. Suppose Joe receives a social security payment of $1,200 in 2012 and the CPI has a value of 100. If the CPl is 106 in 2013 then Joe's new social security payment in 2013 will be $ 1272 If the CPl is 112 in 2014 then Joe's new social security payment in 2014 will be $ 1344

1272 1344

If the nominal interest rate is 5.8 % and the inflation rate is 1.6 % then what is the real interest rate? Enter number rounded to one decimal place with no other characters.

4.2000

You have been offered a job in Tampa making $51592 per year. The CPI in Tampa is 129. You have been offered a job in San Francisco and are in negotiations over the salary. The CPI in San Francisco is 144. If all that matters is the money, how much do you have to make in San Francisco to be indifferent between the two locations? Enter a number rounded to two decimal places. Do not enter a dollar sign.

57591.0700

The minimum wage is not indexed for inflation. Suppose Joe is paid a minimum wage of 59 per hour in 2012 and the CPI has a value of 100. If the CPl is 105 in 2013 then Joe's real minimum wage in 2013 is $ measured in 2012 dollars. If the CPl is 112 in 2014 then Joe's real minimum wage in 2014 is $ measured in 2012 dollars.

8.57, 8.04

In 2010 you earned $42,000 and the CPI had a value of 230.0. In 2015 you earned $50,400 and the CP had a value of 264.5

Between the two years the inflation rate was 15 % Your nominal income increased by 20 % Round your answers to the nearest whole number. real terms, you were better off in 2015.

Which is the largest component of U.S. GDP?

Consumption spending

John B. Retired owns a house on a 10-acre lot filled with apple trees. Each year he hires a few workers to pick the apples and he sells them to Betty's Pies for $4,000. Betty uses the apples to makes pies that she sells for $9,.000 to local restaurants. The local restaurants sell the pies (by the slice) to consumers for $12,000. As a result of these transactions:

GDP increases by $ 12000 The value added by John is $ 4000 The value added by Betty is $ 5000 The value added by the local restaurants is $ 3000 Enter whole numbers in each blank. Do not enter any other characters.

Which spending category of GDP does each of the following transactions count Please enter the letter C, I, G, NX, or N to represent consumption, investment, government spending, net exports, or none.

N, C, C, I, N, G

Bob makes $75,000 per year. If the price index changes from 232.0 to 243.6 then the inflation rate is equal toand his employer should give him a raise equal to in order to keep his real wage constant.

O 596 : $ 3,750

To assess the wellbeing of people in country from to it is best to calculate the percentage change in

O real GDP per capita.

You buy a used car at Carmax. Which of the following is true?

The value of the service provided by Carmax counts in GDP .

Your employer pays you a wage of $22 per hour in a year when the CPI has value of 100. The CPl value in the following year is 105.

To keep your real wage fixed your employer should now pay you $ 23.10 per hour. If yourem ployer wants your real wage to be 6 % higher then he should now pay you $ 24.49 per hour.

A price index is a measure of

a current value relative to a base value

The government spending category (G) of GDP includes

all government expenditures on new final goods and services

The paper mill produces paper and setls it to the textbook company. The textbook company sells books directly to the students. In this example the paper is and the textbook is

an intermediate good: a final good

Coffee is weighted more than tea in the calculation of the CPI if

consumers buy coffee more often than tea.

A restaurant in Orlando buys a new stove. This purchase:

counts in the investment category of GDP

During a recession, the inflation rateand the unemployment

decreases: increases

When nominal GDP rises, we can be certain that

either prices quaritities of goods and services must have risen

en we add up the value of consumption, investment, government purchases and net exports this is known as the

expenditure approach.

Net exports is defined as exports minus imports

exports minus imports

John earns a salary of $75,000 per year. His company has been struggling over the past 3 years so none of the employees have received a pay raise. At the same time, the inflation rate has been positive during each of the three years. John is likely to feel like he can buy goods and services and therefore his real salary will be than his nominal salary.

fewer lower

urban consumer had a A basket of goods and services purchąsed by an average cost of $320 in 2012, $330 in 2013, and $340 in 2014. You may assume the base year is 2012. The inflation rate between 2012 and 2013 was the inflation rate between 2013 and 2014.

higher than

To measure the inflation rate, we calculate the percentage change in i. the consumer price index ii. the GDP deflator iii. GDP nominal GDP

i or ii

Mary graduated from college and found a job making an annual salary of $34,400. When Mary retired from her job forty years later she was earning an annual salary of $75,680. During her forty-year career, the consumer price index increased from 122.5 to 220.5. Across the forty-year period, Mary's nominal salary and Mary's real salary..

increased : increased

The investment category of GDP has three components. They are

purchases of new capital, residential investment, and inventory investment.

Assume the inflation rate falls from 4 % to 2 % . This means that

the average price level is growing more slowly.

A country's Gross Domestic Product (GDP) is best defined as

the market value of all final goods and services produced during a given year.

The rate measures:

the percentage change in the prices of goods and services

Which of the following items purchased by households are included as part of investment spending rather than consumption spending?

the purchases of new houses

If the value of the consumer price index is 232 then

the rate of inflation between the base year and the current is 132 %

Consider the information in the table below:

the value of A is $ 750 the value of Bis$ 3O the value of C is $975 the value of D is $ 26

The income approach to computing GDP calculates

wages + interest + rent +profits.