Econ 102- Midterm 1 PS#1
Consider the following data on U.S. GDP: 2014 Nominal GDP: 17,419 GDP Deflator (base year 2009): 108.3 1994 Nominal GDP: 7,309 GDP Deflator: 73.8 Measured in 2009 prices, real GDP was______ in 1994 and______ in 2014.
$9,903.79 $16,084.03
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected. The real interest rate on this loan is______ than expected. The lender ______ from this unexpectedly high inflation, and the borrower______ under these circumstances.
Lower Loses Gains
The Jackson family buys an old Victorian house from the Walker family. Consumption Investment Government Purchases Net Exports
N/A
The federal government sends your grandmother a Social Security check. Consumption Investment Government Purchases Net Exports
N/A
An American buys a pair of shoes manufactured in Italy. How do the U.S. national income accounts treat the transaction? Net exports and GDP both rise. Net exports and GDP both fall. Net exports fall, while GDP is unchanged. Net exports are unchanged, while GDP rises.
Net exports fall, while GDP is unchanged.
If all quantities produced rise by 10 percent, and all prices fall by 10 percent, which of the following occurs? Real GDP rises by 10 percent, while nominal GDP falls by 10 percent. Real GDP rises by 10 percent, while nominal GDP is unchanged. Real GDP is unchanged, while nominal GDP rises by 10 percent. Real GDP is unchanged, while nominal GDP falls by 10 percent.
Real GDP rises by 10 percent, while nominal GDP is unchanged.
If a Pennsylvania gun manufacturer raises the price of rifles it sells to the U.S. Army, its price hikes will increase both the CPI and the GDP deflator. neither the CPI nor the GDP deflator. the CPI but not the GDP deflator. the GDP deflator but not the CPI
the GDP deflator but not the CPI
Real GDP
the production of goods and services valued at constant prices
Nominal GDP
the production of goods and services valued at current prices
Private Spending: Firms buying trash cans Consumption Investment
Consumption
Private Spending: People Buying Food Consumption Investment
Consumption
Private Spending: People buying clothes Consumption Investment
Consumption
Uncle Henry buys a new refrigerator from a domestic manufacturer. Consumption Investment Government Purchases Net Exports
Consumption
You pay a hairdresser for a haircut. Consumption Investment Government Purchases Net Exports
Consumption
Ford sells a Mustang from its inventory to the Martinez family. Consumption Investment Government Purchases Net Exports
Consumption Investment
Your parents buy a bottle of French wine. Consumption Investment Government Purchases Net Exports
Consumption Net Exports
Government Spending: Buying military equipment Consumption Investment
Investment
Honda expands its factory in Ohio. Consumption Investment Government Purchases Net Exports
Investment
Private Spending: Firms buying computers Consumption Investment
Investment
Private Spending: People Buying Houses Consumption Investment
Investment
Fast forward to the end of 2019. Suppose the entries for that year were the following: Karaoke Machines (2019): Quantity = 10 Price = $80 CD's (2019): Quantity = 50 Price = $15 Compute nominal and real GDP in this small nation for 2019, again assuming that 2017 is the base year. Would nominal GDP rise in 2019? Would this small nation be in recession in 2019? Nominal GDP in this small nation for 2019 is: Using 2017 as the base year, real GDP in this small nation for 2019 is: The best argument supporting the possibility that this small nation has experienced a recession in 2019 is the ___________.
1. $1550 2. $900 3. Higher CPI inflation rate in 2019 than in 2018.
The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2016, they spend a total of $200 for 100 heads of cauliflower, $75 for 50 bunches of broccoli, and $50 for 500 carrots. In 2017, they spend a total of $225 for 75 heads of cauliflower, $120 for 80 bunches of broccoli, and $100 for 500 carrots. Using 2016 as the base year, the CPI for 2016 is_____ , and the CPI for 2017 is_____ .
100 146
The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2016, they spend a total of $200 for 100 heads of cauliflower, $75 for 50 bunches of broccoli, and $50 for 500 carrots. In 2017, they spend a total of $225 for 75 heads of cauliflower, $120 for 80 bunches of broccoli, and $100 for 500 carrots. Calculations of price of one unit of each vegetable in each year:
2016 Cauliflower: $2.00 Broccoli: $1.50 Carrots: $0.10 2017 Cauliflower: $3.00 Broccoli: $1.50 Carrots: $0.20
A small nation of 10 people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is_______ . (Note: Use 2017 as the base year, and fix the basket at 1 karaoke machine and 3 CDs.) Using a method similar to that used to calculate the GDP deflator, the percentage change of the overall price level is_______ . (Note: Again, use 2017 as the base year.) The inflation rate in 2018 is not the same using the two methods because the _______ holds the basket of goods and services constant, while the_________ allows it to change.
37.14% 34.69% CPI GDP Deflator
Consider the following data on U.S. GDP: 2014 Nominal GDP: 17,419 GDP Deflator (base year 2009): 108.3 1994 Nominal GDP: 7,309 GDP Deflator: 73.8 The growth rate of nominal GDP between 1994 and 2014 was _____ , and the growth rate of the GDP deflator between 1994 and 2014 was ______
4.4% 1.9%
The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2016, they spend a total of $200 for 100 heads of cauliflower, $75 for 50 bunches of broccoli, and $50 for 500 carrots. In 2017, they spend a total of $225 for 75 heads of cauliflower, $120 for 80 bunches of broccoli, and $100 for 500 carrots. The inflation rate in 2017 is ________ using the CPI.
46%
You deposit $2,000 in a savings account, and a year later you have $2,100. Meanwhile, the consumer price index rises from 200 to 204. In this case, the nominal interest rate is _____ percent, and the real interest rate is _____ percent. 1, 5 3, 5 5, 1 5, 3
5,3
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected. Inflation during the 1970s was much higher than most people had expected when the decade began. Homeowners who obtained fixed-rate mortgages during the 1960s_________the unexpected inflation, and the banks that made the mortgage loans were________.
Benefited From Harmed
Government Spending: Paying workers to administer government programs Consumption Investment
Consumption
Which of the following does NOT add to U.S. gross domestic product? A. Air France buys a plane from Boeing, the U.S. aircraft manufacturer. B. General Motors builds a new auto factory in North Carolina. C. The city of New York pays a salary to a policeman. D. The federal government sends a Social Security check to your grandmother.
D. The federal government sends a Social Security check to your grandmother.
When the Japanese car maker Toyota expands one of its car factories in the United States, what is the likely impact of this event on the gross domestic product and gross national product of the United States? GDP rises, and GNP falls. GNP rises, and GDP falls. GDP shows a larger increase than GNP. GNP shows a larger increase than GDP.
GDP shows a larger increase than GNP.
California hires workers to repave Highway 101. Consumption Investment Government Purchases Net Exports
Government Purchases
Consider the following data on U.S. GDP: 2014 Nominal GDP: 17,419 GDP Deflator (base year 2009): 108.3 1994 Nominal GDP: 7,309 GDP Deflator: 73.8 The growth rate of nominal GDP between 1994 and 2014 was _______ than the growth rate of real GDP.
Higher
The participation of women in the U.S. labor force has risen dramatically since 1970. This rise likely _________ GDP in the U.S. Now imagine a measure of well-being that includes time spent working in the home and taking leisure. The change in this measure of well-being would be _______ the change in GDP.
Increased Less Than
Aunt Jane buys a new house from a local builder. Consumption Investment Government Purchases Net Exports
Investment
Ford manufactures a Focus and sells it to Avis, the car rental company. Consumption Investment Government Purchases Net Exports
Investment
Government Spending: Building bridges Consumption Investment
Investment
Government Spending: Building roads Consumption Investment
Investment
GDP Deflator
a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100:
The largest component in the basket of goods and services used to compute the CPI is food and beverages. housing. medical care. apparel.
housing.