Macro Econ HW Chapters 4,10,11

Most goods and services produced at home

and most goods and services produced illegally are excluded from GDP

The highest form of competition is called

perfect competition

Check My Work Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods

Indexation refers to

using a law or contract to automatically correct a dollar amount for the effects of inflation.

GDP is defined as the

value of all final goods and services produced within a country in a given period of time.

In a simple circular-flow diagram, households buy goods and services with the income they get from

wages, rent and profit

If 2010 is the base year, then the inflation rate in 2015 equals

(CPI in 2015 - CPI in 2010) / CPI in 2010 x 100

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $58. The value of the CPI in 2016 was

(Cost of basket in 2016 / cost of basket in base year) * 100 = 111.5

Consumer Price Index (CPI) formula

= (current cost of market basket/base year cost of market basket) x 100

A U.S. publisher purchases new computers that were manufactured in the U.S. This purchase by itself makes

A positive contribution both to investment and to GDP.

In a simple circular-flow diagram, total income and total expenditure are

always equal because every transaction has a buyer and a seller

If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos rises?

Both the equilibrium price and quantity would increase.

In the economy of Talikastan in 2015, consumption was $5300, GDP was $8800, government purchases were $1800, imports were $600, and investment was $2000. What were Talikastan's exports in 2015?

GDP = Consumption + Investment + Government purchases + Exports - Imports 8800 = 5300 + 2000 + 1800 + Exports - 600 Exports = 300 Hence exports is $300.

In the CPI, goods and services are weighted according to

How much consumers buy of each good or service

The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2013.Year Price ofWaffles Quantity of Waffles Price of Pancakes Quantity ofPancakes2010 $2.00 80 $1.00 1002011 $2.00 100 $2.00 1202012 $2.00 120 $3.00 1502013 $4.00 150 $3.00 200

In 2010 : Nominal GDP= ($2)(80)+($1)(100)=$260 Base year 2013 . So ,In 2010 : Real GDP = ($4)(80)+($3)(100)= $620 GDP deflator in 2010 = (Nominal GDP/ Real GDP)100 = (260/620)100= 41.9

Check My Work If Max experiences a decrease in his income, then we would expect Max's demand for

Normal goods to decrease

Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the inflation rate is 2 percent, then after one year,

Sophia will have 5 percent more money, which will purchase 3 percent more goods.

Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome?

Students would purchase more than 750 cups per day.

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption?

The CPI in 2003 was 100, 105 in 2004 and 130 in 2005 as we know that CPI can be used to measure inflation, and in the question inflation was higher in 2004-2005 as compared to in 2003-2004. The CPI increased by 5 in 2004 from 2003, and 2 5 in 2005 from 2004.

Between October 2014 and October 2015, the CPI in Canada rose from 120 to 124 and the CPI in Mexico rose from 210 to 229.1. What were the inflation rates for Canada and Mexico over this one-year period?

a. 3.3 percent for Canada and 9.1 percent for Mexico

A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by

adjusting the price of the good to account for the quality change.

In a market economy, supply and demand determine

both the quantity of each good produced and the price at which it is sold.

Which of the following is a way to compute GDP?

dd up the market values of all final goods and services

When the price of peaches changes, the demand curve for peaches

does not shift because the price of peaches is measured on the vertical axis of the graph.

Gross domestic product includes all

legal final goods and services, but it excludes illegal final goods and services.

The consumer price index is used to

monitor changes in the cost of living over time

When all market participants are price takers who have no influence over prices, the markets have

numerous buyers and sellers.

Check My Work If something happens to alter the quantity demanded at any given price, then

the demand curve shifts.

If total spending rises from one year to the next, then which of the following could not be true?

the economy is producing a smaller output of goods and services, and goods and services are selling at lower prices.

As long as prices are rising over time, then

the nominal interest rate exceeds the real interest rate

The term inflation is used to describe a situation in which

the overall level of prices in the economy is increasing.

Assume the market for pork is perfectly competitive. When one pork buyer exits the market,

the price of pork does not change.