ECO 2013 Test 2

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as

$20.00 purchased in 1955

If the CPI was 127 in 1972 and is 324 today, then $10 in 1972 purchased the same amount of goods and services as

$25.51 purchases today.

Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about

$40,000

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

(CPI in 2015-CPI in 2014)/CPI in 2014

The average income in a rich country, such as the United States or Japan, is more than

10 times, but less than 20 times, the average income in a poor country, such as Indonesia or Nigeria.

An economy's production form takes the form Y = AF(L, K, H, N).

A

If the CPI was 125 this year and 120 last year, then

All of the above are correct.

Investment from abroad

All of the above are correct.

Natural resources

All of the above are correct.

Outward-oriented policies

All of the above are correct.

As of 2014, using real GDP per person as a measure, we would classify

Canada as an advanced economy, Mexico as a middle-income country, and Pakistan as a poor country.

Which of the following is correct?

Economists argue that outward rather than inward policies are likely to promote economic growth.

Which of the following is correct?

Even though Japan had a higher growth rate of real GDP per person than the U.S. over the last 120 years, it's level of real GDP per person is less than that of the U.S.

Which of the following countries has had the greatest productivity per worker within the last ten years?

Germany

Which of the following countries had the highest growth rate over about the last 100 years?

Japan

Suppose that real GDP grew more in Country A than in Country B last year.

None of the above are correct.

In which of the following countries has economic growth been sufficiently high that income would double every ten years?

South Korea

Which of the following is not correct?

The consumer price index is used to measure the quantity of goods and services that the economy is producing.

Of the following countries, which grew most slowly, in terms of real GDP per person, over about the last 120 years?

United States

The long-run effects of an increase in the saving rate include

a higher level of productivity.

​There are large differences in the standard of living

across countries and within countries over time.

Japan is

an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States.

The level of real GDP person

and the growth rate of real GDP per person vary widely across countries.

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?

apparel

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S.

consumer price index to increase more than the GDP deflator.

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.

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 measure all changes in the quality of goods.

If the quality of a good deteriorates while its price remains the same, then the value of a dollar

falls and the cost of living increases.

Productivity is defined as the quantity of

goods and services produced from each unit of labor input.

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.

Other things equal, the likelihood that a country will experience a relatively-high level of income is greater if the country

has natural seaports.

When the consumer price index rises, the typical family

has to spend more dollars to maintain the same standard of living.

Over extended periods of time, population growth

has uncertain effects on the standard of living.

In the United States, nominal interest rates were

high in the 1970s and low in the 1990s

Other things the same, a country that increases its savings rate will have

higher future capital and higher future real GDP per person.

In the equation for the production function H/L represents

human capital per worker.

A country's human capital increases

if its workers become better educated or healthier.

Inward-oriented policies

in some ways are like prohibiting the use of certain technologies.

An increase in the saving rate would, other things the same

increase growth more for a poor country than for a rich country, but raise growth temporarily.

Suppose that the U.S. undertakes a policy to increase its saving rate. This policy will likely

increase the growth of real GDP per person for several decades.

On a production function, as capital per worker increases, output per worker

increases. This increase is smaller at larger values of capital per worker.

When the overall level of prices in the economy is increasing, economists say that the economy is experiencing

inflation.

For the purpose of calculating the consumer price index, the basket of goods

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.

The rate of real economic growth

is underestimated using measures of income growth

If the price of a good has risen over time,

it has become more scarce only if the price adjusted for inflation has risen.

The catch-up effect refers to the idea that

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

In a market economy, we know that a resource has become scarcer when

its price rises relative to other prices

Productivity is the

key determinant of living standards, and growth in productivity is the key determinant of growth in living standards.

Human capital is the

knowledge and skills that workers acquire through education, training, and experience.

A decrease in the price of large tractors imported into the United States from Russia

leaves both the GDP deflator and the consumer price index unchanged.

If a country were to increase its saving rate, then in the long run it would also increase its

level of income.

For a given year, productivity in a particular country is most closely matched with that country's

level of real GDP divided by hours worked over that year.

In a market economy, scarcity of resources is most clearly reflected in

market prices.

Rapid population growth

may depress economic prosperity by reducing the amount of capital which each worker has to work with.

An increase in capital will increase real GDP per person

more in a poor country than a rich country. The increase in real GDP per person will be the same whether the addition to capital is from domestic or foreign investment.

Proprietary technology is technology that is

not widely used because it is known or controlled only by the company that discovered it.

Greater scarcity of a natural resource is indicated

only by an increase in the price of the resource that is greater than the rate of inflation.

The economy's inflation rate is the

percentage change in the price level from the previous period.

The inflation rate is defined as the

percentage change in the price level from the previous period.

If natural resources had become scarcer, then we would expect their

prices to have risen more than inflation, but they have not

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.

If a country's saving rate increases, then in the long run

productivity and real GDP per person are both higher.

In the equation for the production function Y/L represents

productivity.

A nation's standard of living is best measured by its

real GDP per person.

Which of the following will increase a country's real GDP per person?

reducing restrictions on foreign trade and foreign investment

Average income has been stagnant for many years in

some Sub-Saharan African countries.

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 inflation rate you are likely to hear on the nightly news is calculated from

the CPI.

A Korean steel company produces steel in the United States, with some of its steel being exported to other nations and some of it being sold within the United States. If the prices of this steel increase, then

the GDP deflator and the CPI will both increase

Which of the following pairs of countries experienced approximately the same rate of growth of real income per person over about the last 120 years?

the United States and Argentina

If the price of Spanish olives imported into the United States decreases, then

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

Economists use the term inflation to describe a situation in which

the economy's overall price level is rising.

Other things the same, if a country raises its saving rate, then in the long run

the level of real GDP is higher but the growth rate of real GDP is unchanged.

The term inflation is used to describe a situation in which

the overall level of prices in the economy is increasing.

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 is used to

turn dollar figures into meaningful measures of purchasing power.

Indexation refers to

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

A policy that increases saving

will improve economic growth and health outcomes.

For which rate of inflation given below will the real interest rate be higher than the nominal interest rate?

​-0.5%

​If real income per person was $47,210 in the U.S. in 2010, and $55,860 in 2014, what was the annual growth rate over this time period?

​4.29 percent per year