ECON 2 homework
What basket of goods and services is used to construct the CPI?
The goods and services that are typically bought by consumers as determined by government surveys
A budget deficit
changes the supply of loanable funds
In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the
consumer price index rises much more than does the GDP deflator
In an economy where net exports are zero, if saving rises in some period, then in that period
consumption falls and investment rises
The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as
consumption of services
Gross domestic product can be measured as the sum of
consumption, investment, government purchases, and net exports.
The traditional view of the production process is that capital is subject to
diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries
if total spending rises from one year to the next then
either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both
One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI
fails to account for the introduction of new goods
If Mr. Keating quits his job as a teacher to home school his own children, GDP
falls because his market income decreases
GDP is the sum of the market value of the
final goods and services
financial intermediaries are
financial institutions through which savers can indirectly provide funds to borrowers
In recent decades, Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in
foreign portfolio investment
In the United States, nominal interest rates were
high in the 1970s and low in the 1990s.
In the actual economy, goods and services are purchased by
households, firms, and the government
The real interest rate tells you
how fast the purchasing power of your bank account rises over time
An understanding of the best ways to produce goods and services is called
technology
Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth?
Nutrition
Which of the following would be excluded from 2019 GDP? The sale of
a home built in 2018 and first sold in 2019
The CPI is calculated
monthly
Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?
Corporate bond, U.S. government bond, municipal bond
A policy that increases saving will
improve economic growth and health outcomes
The value of plant and equipment worn out in the process of manufacturing goods and services is measured by
depreciation
Sam bakes a cake and sells it to Carla for $10. Woody pays Diane $30 to tutor him. In this economy, GDP is
$40
Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is GDP here?
$80
Suppose the consumer price index was 184 in Year 1 and 198.17 in Year 1. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period?
-1.9 percent
If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy experienced
11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3.
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year.
141 percent
If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was the real gdp
40 billion
Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0.
Country B had the higher level of real GDP and real GDP per person
Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
Mexican GDP, but it is not included in U.S. GDP
Which of the following is the correct formula for calculating the consumer price index?
[(price of basket of goods and services in current year/price of basket in base year)] × 100
Crowding out occurs when investment declines because
a budget deficit makes interest rates rise
The consumer price index tries to gauge how much incomes must rise to maintain
a constant standard of living
Industrial machinery is an example of
a factor of production that in the past was an output from the production process
For the purpose of calculating GDP, investment is spending on
capital equipment, inventories, and structures, including household purchases of new housing
The basic tools of supply and demand are
central to macroeconomic analysis as well as to microeconomic analysis
The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will
fall and remain lower for a long time
During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person
grew, but by less than 12 percent
By far the largest category of goods and services in the CPI basket is
housing
The nominal interest rate tells you
how fast the number of dollars in your bank account rises over time
if an economy's gdp falls, then it must be the case that the economy's
income and expenditure both fall
Gross domestic product measures
income and expenditures
The CPI differs from the GDP deflator in that
increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator
When the quality of a good improves while its price remains the same, the purchasing power of the dollar
increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should
lend support to the invisible hand by maintaining property rights and political stability
Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity
more in the short run than in the long run
The GDP deflator is the ratio of
nominal GDP to real GDP multiplied by 100
After graduation, an American college student moves to Japan to teach English. Her salary is included
only is Japan's GDP
Educated people may generate ideas that increase production. These ideas
produce a return to society from education that is greater than the return to the individual
If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity
rises but real GDP per person falls
Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that
the consumer price index will increase in the future
Which of the following can be measured by the level of real GDP per person?
the standard of living but not productivity
it is claimed that a secondary advantage of mutual funds is
they give ordinary people access to the skills of professional money managers
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the
CPI better reflects the goods and services bought by consumers
If the price of Italian shoes imported into the United States increases, then
CPI will increase but GDP deflator will not
Which of the following countries achieved higher economic growth, in part by mandating a reduction in population growth?
China
Which of the following statements accurately describes catch-up growth?
In one generation, China will be one of the richest countries in the world, if China's GDP per person continues to grow 9% per year
Which of the following statements is correct about the relationship between inflation and interest rates
In order to fully understand interest rates, we need to know how to correct for the effects of inflation
When ranking movies by nominal box office receipts, what important fact is overlooked?
Prices, including those for movie tickets, have been rising over time
In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?
Private saving is equal to government expenditures - national saving and private saving are equal when government has a balanced budget
GDP per person tells us the income and expenditure of the
average person in the economy
An increase in the price of bread produced domestically will be reflected in
both the GDP deflator and the consumer price index
Educational attainment tends to be
low in countries with high population growth
Indexation refers to
using a law or contract to automatically correct a dollar amount for the effects of inflation
The producer price index measures the cost of a basket of goods and services
bought by firms
Suppose Japanese-based Toshiba Corporation builds and operates a new computer factory in the United States. Future production from such an investment will
increase U.S. GDP more than it increases U.S. GNP
From 1960 to 1990, in which of the following countries has investment resulted in economic growth sufficiently higher than that in the United States?
south korea
Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has
increased measured GDP by the value added by the restaurant's preparation and serving of the meals
The term economists use to describe a situation in which the economy's overall price level is rising is
inflation
The one variable that stands out as the most significant explanation of large variations in living standards around the world is
productivity
The traditional view of the production process is that capital is subject to
diminishing returns
