Macroeconomics Midterm #1

Using the data in the above table, net domestic product equals

$1,120.

From the data in the above table, GDP equals

$1,360.

Using the data in the above table, what is nominal GDP in 2005?

$2808 billion

The above table gives data for a hypothetical nation. Net domestic product is

$4,054 billion.

If Dexter's real GDP is $50 in 2004, what is Dexter's chain-weighted real GDP in 2005?

$67.75

What is the value of real GDP if the value of the GDP deflator is 122.5 and nominal GDP is $825 billion?

$673.5 billion

The base year for Dexter is 2004. What is Dexter's real GDP in 2005?

$69

In the table above, what inflation rate belongs in space C?

-4.0 percent

Of the following sequences of price levels, which correctly represents a 5 percent inflation rate?

100, 105, 110.25, 115.76

In the table above, what inflation rate belongs in space E?

15.4 percent

The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is_____.

160

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2004. What is Dexter's GDP deflator in 2005?

169

In 2004 and 2005, consumers in Dexter consumed only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The reference base period for Dexter's CPI is 2004. What is the CPI in 2005?

169

In the table above, what inflation rate belongs in space A?

17.0 percent

Suppose that the demand curve is D1. When the demand increases by 4, the equilibrium quantity increases by

2.

Suppose that the demand curve is D2. To increase the equilibrium quantity by 1, the demand needs to increase by

2.

If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals

225.

If real GDP in 2003 is $9 trillion and real GDP in 2004 is $9.27 trillion, then the economic growth rate in 2004 is_____.

3.0 percent

Refer to the table above. Suppose that in normal years demand is represented by Case 2 and supply is represented by Case B. In a normal year the equilibrium quantity of wapanzo beans will be

6 million pounds.

In the table above, what inflation rate belongs in space B?

6.8 percent

In 2004 and 2005, consumers in Dexter consumed only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The reference base period for Dexter's CPI is 2004. What is the inflation rate in 2005?

69 percent

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2004. What is Dexter's GDP deflator inflation rate from 2004 to 2005?

69%

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2005. What is Dexter's GDP deflator inflation rate from 2004 to 2005?

69%

If Dexter's real GDP is $120 in 2005, what is Dexter's chain-weighted real GDP in 2004?

88.56

The Consumer Price Index for country Beta in 2003 was equal to 203.5 and for 2004 it was 199.6. On the basis of this information which of the following statements is true?

Beta experienced a deflation rate of 1.9 percent.

When supply decreases and demand does not change, the equilibrium quantity increases and the equilibrium price falls.

False

Real GDP is not a good indicator of economic welfare because.

economic welfare depends on many factors not measured or not measured accurately by real GDP

If this year's price level exceeds last year's,

the inflation rate between these years has been positive.

Suppose that the price level was 100 in 2002, 110 in 2003, and 130 in 2004. Over these three years,

the inflation rate was positive and accelerating.

The figure illustrates the market for chairs. If the supply of chairs increases, the price of a chair_____$40 and the quantity_____.

will fall below; demanded will increase

Real GDP in 2002 is $100. Between 2002 and 2003, using 2002 prices GDP grew 8 percent and using 2003 prices real GDP grew 4 percent. What does real GDP in 2003 equal?

$106

The base year for Dexter is 2004. What is Dexter's nominal GDP in 2005?

$120

The base year for Dexter is 2005. What is Dexter's real GDP in 2005?

$120

Suppose that nominal GDP per person is $18,000 in 2004, the 1998 GDP deflator is 100, and the 2004 GDP deflator is 110. The approximate real per person GDP in 2004 is

$16,364.

Using the data in the table above, gross domestic product equals

$2,400.

Using the data in the above table, net private domestic investment equals

$210.

Using the data in the above table, what is real GDP in 2004?

$2381 billion

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2004. What is Dexter's real GDP in 2005?

$255

Refer to the table above. Suppose that in normal years demand is represented by Case 2 and supply is represented by Case B. In a normal year the price of wapanzo beans will be

$3 per pound.

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2004. What is Dexter's real GDP in 2004?

$320

In 2004 and 2005, consumers in Dexter consumed only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The reference base period for Dexter's CPI is 2004. What is the cost of the CPI basket in 2004?

$320

The above table gives data for a hypothetical nation. Gross domestic product is

$4,079 billion.

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2004. What is Dexter's nominal GDP in 2005?

$430

Using the data in the above table, gross private domestic investment equals

$460.

The base year for Dexter is 2004. What is Dexter's nominal GDP in 2004?

$50

The base year for Dexter is 2004. What is Dexter's real GDP in 2004?

$50

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2005. What is Dexter's real GDP in 2004?

$540

In 2004 and 2005, consumers in Dexter consumed only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The reference base period for Dexter's CPI is 2004. What is the cost of the CPI basket in 2005?

$540

In 2004 the Consumer Price Index was equal to 163.8 and in 2005 it was equal to 157.5. What is the inflation rate over this time period?

-3.85 percent

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The base year for Dexter is 2004. What is Dexter's GDP deflator in 2004?

100

In 2004 and 2005, Dexter produced only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. Thebase year for Dexter is 2004. What is Dexter's GDP deflator in 2004?

100

In 2004 and 2005, consumers in Dexter consumed only books and pens. The prices and quantities for 2004 and 2005 are listed in the table above. The reference base period for Dexter's CPI is 2004. What is the CPI in 2004?

100

If the price level for 2003 is 220 and for 2004 is 250, what is the rate of inflation between the two years?

13.6 percent

In the table above, what price level belongs in space D?

130

If the CPI was 132.5 at the end of 2003 and 140.2 at the end of 2004, the inflation rate over these two years was

3.8 percent.

What is Dexter's chain-weighted real GDP growth rate from 2004 to 2005?

35.5%

If the CPI was 132.5 at the end of 2003 and 140.2 at the end of 2004, the inflation rate over these two years was

5.8 percent.

When an economy experiences inflation the

All of the above answers are correct.- 1) price level rises persistently. 2) quantity of money is growing. 3) value of money gets smaller and smaller.

An increase in demand combined with no change in supply results in a rightward movement along the demand curve

False

The above figure shows the market for pizza. Which figure shows the effect of a new report by the U.S. Surgeon General that eating pizza lowers cholesterol levels, an outcome many people want?

Figure A- D1 shift right

The above figure shows the market for pizza. Which figure shows the effect of an increase in the price of a complement such as soda?

Figure B - D1 Shifts Left

The above figure shows the market for pizza. Which figure shows the effect of a decrease in the price of a hamburger, which for consumers is a substitute for pizza?

Figure B- D1 Shifts Left

The above figure shows the market for hamburger. Which figure shows the effect of an announcement by theU.S.Food and Drug Administration (FDA)that eating hamburger causes early death?

Figure B- D1 shift left

The above figure shows the market for pizza. Which figure shows the effect of an increase in the price of the tomato sauce used to produce pizza?

Figure C - S1 shift left

The above figure shows the market for hamburger. Which panel shows the effect of a drought in "cattle country"?

Figure C- S1 shift left

The above figure shows the market for hamburger. Which panel shows the effect of a new excise tax on ground beef?

Figure C- S1 shift left

Which of the following is included in "compensation of employees" part of the income approach to measuring GDP?I.Wages and salaries.II.Pension fund contributions.III.Social security contributions.

I, II and III

Which of the following is NOT part of GDP?

Social security payments made to the elderly

The base year for Dexter is 2005. What is Dexter's real GDP in 2004?

The base year for Dexter is 2005. What is Dexter's real GDP in 2004?

Which one of the following transactions in a particular year is included in gross domestic product for that year?

The government pays a computer services company that assisted in the delivery of Social Security payments to retirees.

When demand decreases and supply does not change, the equilibrium price falls and the equilibrium quantity decreases.

True

When demand for a good decreases, its equilibrium price falls and equilibrium quantity decreases.

True

You observe that the price of a good rises and the quantity decreases. These observations can be the result of the supply curve shifting leftward

True

In the market for books, the supply of books will decrease if any of the following occur except

a decrease in the price of a book.

An example of "investment" in computing real GDP using the expenditure approach is the purchase of

a new set of tools by an auto mechanic, for use in repairing cars.

In the above figure, if D2 is the demand curve, then a price of P3 would result in

a surplus of Q3 - Q1.

Refer to the table above. Suppose that in normal years demand is represented by Case 2 and supply is represented by Case B. If there is a drought in the wapanzo bean growing region then supply will_____and demand will_____.

become case A; stay at case 2

Refer to the table above. Suppose that in normal years demand is represented by Case 2 and supply is represented by Case B. If there is exceptionally good growing weather in the wapanzo bean growing region then supply will_____ and demand will_____.

become case C; stay at case 2

The consumer price index (CPI)

compares the cost in the current period to the cost in a reference base period of a basket of goods typically

The chain-weighted output index method of calculating real GDP compares

compares the quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of output.

Goods that are produced this year, stored in inventories, and then sold to consumers next year

count in this year's GDP.

Which of the following would lead GDP to overstate economic welfare?

electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution

The table gives the demand and supply schedules for boat rides. If the supply of boat rides increases by 20 rides a day, the price will_____.

fall to $6 a ride

In years with inflation, nominal GDP increases_____real GDP.

faster than

One year after the base year, the price level rises. In this year, nominal GDP is_____real GDP, and the GDP deflator is_____.

greater than; greater than 100

What we produce during our working time is_____as part of GDP and the enjoyment we gain from our leisure time is_____as part of GDP.

included; not included

In the market for bananas, the price is $2.00 a bunch. An increase in the supply of bananas decreases the price of bananas and_____.

increases the quantity of bananas demanded

Reasons why valuing goods at their market prices is different than valuing them at their factor costs include

indirect taxes and subsidies.

If the GDP deflator for 2004 is 125, nominal GDP

is greater than real GDP in 2004.

Gross domestic product is the total_____produced within a country in a given time period.

market value of all final goods and services

When the GDP deflator increases from 120 to 126 in one year,_____.

money is losing its value

Which of the following is NOT part of the expenditure approach to measuring GDP?

net interest

Because pollution reduces economic welfare, real GDP

overstates economic welfare.

In the above figure, a change in quantity demanded with unchanged demand is represented by a movement from

point a to point e.

In the above figure, a change in quantity supplied with unchanged supply is represented by a movement from

point b to point a.

In the above figure, if D2 is the original demand curve and the population falls, which price and quantity might result?

point b, with price P1 and quantity Q1

In the above figure, if D2 is the original demand curve for a normal good and income decreases, which price and quantity might result?

point b, with price P1 and quantity Q1

In the above figure, if D2 is the original demand curve and consumers come to expect that the price of the good will rise in the future, which price and quantity might result?

point c, with price P3 and quantity Q3

In the above figure, if D2 is the original demand curve and the price of a substitute in consumption rises, which price and quantity might result?

point c, with price P3 and quantity Q3

Which of the following is NOT included in real GDP?

production that takes place in the underground economy

Aggregate expenditures include all of the following EXCEPT

purchases of intermediate goods.

The old, traditional base-year method of calculating real GDP compared

quantities produced in different years using prices from a year chosen as a reference period.

An increase in demand combined with no change in supply

raises the equilibrium price.

In the post World War II period, considerable growth in total production took place in the U.S. But at the same time, businesses were able to produce by dumping their waste into the Great Lakes with minimal cost, significantly polluting the bodies of water as a result. This occurrence is an example where

real GDP gives an overly positive view of economic welfare.

Suppose that the demand curve is D2. To increase the equilibrium price by $1, the demand curve needs to shift to the_____ by______.

right; 2.

In the figure, the equilibrium price is initially $3 per bushel of wheat. If buyers come to expect that the price of a bushel of wheat will rise in the future, but sellers do not, the current equilibrium price will

rise.

In the figure, the equilibrium price is initially $3 per bushel of wheat. If suppliers come to expect that the price of a bushel of wheat will rise in the future, but buyers do not, the current equilibrium price will

rise.

Which of the following is included in the government purchases component of the expenditure approach to GDP?

state government expenditure on local schools

Refer to the table above. Suppose that in normal years demand is represented by Case 2 and supply is represented by Case B. If it is discovered that wapanzo beans help prevent cancer then supply will_____and demand will_____.

stay at case B; become case 1

You observe that the price of a good rises and the quantity decreases. These observations can be the result of the

supply curve shifting leftward.

In the computation of GDP, social security payments count as

transfer payments and are not included in GDP.

In the national income accounts, government purchases of goods and services exclude

transfer payments.