MACRO PT 2

If the price of Italian shoes imported into the United States increases, then

the consumer price index will increase, but the GDP deflator will not increase.

If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP?

$40 billion

If Year 1 is the base year and Year 2 is the following year, then the inflation rate in Year 2 equals

[(CPI in Year 2 − CPI in Year 1)/CPI in Year 1] × 100.

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

In the United States, nominal interest rates were

high in the 1970s and low in the 1990s.

If real GDP doubles and the GDP deflator doubles, then nominal GDP

quadruples.

Core CPI is

the CPI excluding food and energy.

If net exports is a negative number for a particular year, then

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year.

In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 237 for 2015. President Hoover's 1931 salary was equivalent to a 2015 salary of about

$1,169,408.

Nate collected Social Security payments of $220 a month in Year 1. If the price index rose from 90 to 108 between Year 1 and Year 2, then his Social Security payments for Year 2 should have been

$264.

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

Over the past century in the United States, real GDP per person has grown, on average, by about

2 percent per year.

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

6 percent.

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.

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

Which of the following measures how the level of well-being in a country has changed over time?

Growth rate of real GDP per person

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.

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

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

Out of the following economic statistics, which is the best measure of economic prosperity?

The level of real GDP

Which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?

The percentage of the labor force that is out of work and differences in average income from country to country

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

The purchase of a new house

Which of the following is included in the calculation of GDP?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?

The real interest rate is the nominal interest rate minus the rate of inflation.

Which of the following can be measured by the level of real GDP per person?

The standard of living but not productivity

The consumer price index tries to gauge how much incomes must rise to maintain

a constant standard of living.

For an economy as a whole,

always equal because every transaction has a buyer and a seller.

Real GDP is the yearly production of final goods and services valued at

constant prices.

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

decreased.

If total spending rises from one year to the next, then Question options:

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.

If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes

exactly one-third as much to GDP as does a dress

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.

Government purchases include spending on goods and services by

federal, state, and local governments.

By far the largest category of goods and services in the CPI basket is

housing.

The real interest rate tells you

how fast the purchasing power of your bank account rises over time.

In the simple circular-flow diagram, with households and firms, GDP can be computed as the

income received by households, in the form of wages, rent and profit

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.

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

intermediate goods

The value of goods added to a firm's inventory in a certain year is treated as

investment, since GDP aims to measure the value of the economy's production that year.

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100.

Changes in real GDP reflect

only changes in the amounts being produced.

The inflation rate is defined as the

percentage change in the price level from the previous period

Productivity is the amount of goods and services

produced for each hour of a worker's time. It is linked to a nation's economic policies.

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

productivity.

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

substitution bias.

Social Security payments are indexed for inflation using

the CPI.

The key determinant of the standard of living in a country is

the amount of goods and services produced from each hour of a worker's time.

GDP is defined as the

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

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

−2 percent.