Mac Econ test2 part 3

16. The GDP deflator for years subsequent to the base year measures the change in a. nominal GDP from the base year that cannot be attributable to a change in real GDP. b. real GDP from the base year that cannot be attributable to a change in nominal GDP. c. nominal GDP from the base year that cannot be attributable to a change in prices. d. real GDP from the base year that cannot be attributable to a change in prices.

a

20. Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct? a. The economy experienced inflation between 2004 and 2005 and between 2005 and 2006. b. The inflation rate was positive between 2004 and 2005, and it was negative between 2005 and 2006. c. The inflation rate was higher between 2005 and 2006 than it was between 2004 and 2005. d. All of the above are correct.

a

4. For the purpose of calculating the consumer price index, the basket of goods a. is kept the same from year to year so that the effects of price changes are isolated from the effect of any quantity changes that might be occurring at the same time. b. is kept the same from year to year; otherwise, the value of the index would remain constant from year to year. c. varies from year to year; otherwise, the value of the index would remain constant from year to year. d. varies from year to year so that consumers' buying patterns are updated in a timely fashion.

a

8. In the GDP accounts production equals a. income. b. income + saving. c. income - government expenditures. d. income - imports.

a

11. The term economists use to describe a situation in which the economy's overall price level is rising is a. growth. b. inflation. c. recession. d. expansion.

b

2. The goal of the consumer price index is to measure changes in the a. costs of production. b. cost of living. c. relative prices of consumer goods. d. production of consumer goods.

b

3. U.S. GDP a. includes production of foreigners working in the U.S. and production by U.S. residents working in foreign countries. b. includes production of foreigners working in the U.S. but excludes production by U.S. residents working in foreign countries. c. excludes production of foreigners working in the U.S. but includes production by U.S. residents working in foreign countries. d. excludes production of foreigners working in the U.S. and production by U.S. residents working in foreign countries.

b

5. GDP a. is used to monitor the performance of the overall economy but is not the single best measure of a society's economic well-being. b. is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being. c. is not used to monitor the performance of the overall economy but is the single best measure of a society's economic well-being. d. is not used to monitor the performance of the overall economy and is not the single best measure of a society's economic well-being.

b

1. In the base year, the GDP deflator is always a. -1. b. 0. c. 1. d. 100.

d

12. The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows: a. Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate. b. Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. c. Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate. d. Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

c

13. When the overall level of prices in the economy is increasing, economists say that the economy is experiencing a. economic growth. b. stagflation. c. inflation. d. deflation.

c

14. If total spending rises from one year to the next, then a. the economy must be producing a larger output of goods and services. b. goods and services must be selling at higher prices. c. 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. d. employment or productivity must be rising.

c

15. National income is defined as a. the total income of a nation minus losses from depreciation. b. the income that households and noncorporate businesses receive. c. the total income earned by a nation in the production of goods and services. d. the income that households and noncorporate businesses have left after satisfying all their obligations to the government.

c

17. Which of the following is included in government purchases? a. unemployment benefits a state pays b. Social Security payments the U.S. government makes c. the services of a U.S. government attorney valued at the cost of her salary d. All of the above are correct.

c

19. David earned a salary of $43,500 in 1994 and $89,000 in 2010. The consumer price index was 148.2 in 1994 and 215.3 in 2010. David's 1994 salary in 2010 dollars is a. $43,849.05 b. $61,263.43 c. $63,195.34 d. $93,655.50

c

23. Which of the following transactions adds to U.S. GDP for 2015? a. In 2015, Ann sells a car that she bought in 2011 to Bill for $7,000. b. An American management consultant works in Canada during the summer of 2015 and earns the equivalent of $40,000 during that time. c. When Ken and Kim were both single, they lived in separate apartments and each paid $800 in rent. Ken and Kim got married in 2015 and they bought a previously unoccupied house that, according to reliable estimates, could be rented for $1,700 per month. d. None of the above transactions adds to U.S. GDP for 2015.

c

9. What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services? a. capital b. consumption c. investment d. costs

c

Table 24-15 The following table shows the prices of good X and good Y for 2013-2015. In addition, assume the basket of goods used to compute the Consumer Price Index consists of 3 units of good X and 4 units of good Y. Year Price of Good X ($). Price of Good Y ($) 2013. 2.00. 1.00 2014 3.00 2.00 2015. 4.00 3.00 24. Refer to Table 24-15. The inflation rate in 2014 was a. 57%. b. 63%. c. 70%. d. 75%.

c

10. When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle, a. U.S. consumption falls by $500, U.S. net exports decline by $500, and U.S. GDP declines by $1000. b. U.S. consumption does not change, U.S. net exports decline by $500, and U.S. GDP declines by $500. c. U.S. consumption increases by $500, U.S. net exports remain the same, and U.S. GDP increases by $500. d. U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

d

18. A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called a. inventory goods. b. transitory goods. c. final goods. d. intermediate goods.

d

21. 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 a. reduced measured GDP. b. not affected measured GDP. c. increased measured GDP by the value of the restaurant meals. d. increased measured GDP by the value added by the restaurant's preparation and serving of the meals.

d

22. Determine the effects on the CPI and the GDP deflator: Gucci raises the price of the Italian handbags it sells in the U.S. a. The CPI and GDP deflator both rise b. The CPI and GDP deflator both fall. c. The GDP deflator rises, the CPI does not. d. The CPI rises, the GDP deflator does not.

d

6. Which of the following is included in the consumption component of GDP? a. household purchases of appliances. b. household purchases of medical care. c. household purchases of food. d. All of the above are included in the consumption component of GDP.

d

7. In 2015, GDP per person in the United States was almost a. $38,000. b. $36,000. c. $49,000 d. $56,000

d

Table 24-7. The table below applies to an economy with only two goods — hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. homework 4 Copyright Cengage Learning. Powered by Cognero. Page 5 Year. Price of hamburgers. Price of hot dogs 2009. $5.00 $3.00 2010 $5.50 $3.30 2011 $5.61 $3.63 25 Refer to Table 24-7 . Between 2009 and 2011, the cost of living increased by a. 6 percent. b. 19 percent. c. 14 percent. d. 17 percent.

d