ECO121 part 3

a form of government spending that is not made in exchange for a currently produced good or service.

A transfer payment is a. a payment for moving expenses a worker receives when he or she is transferred by an employer to a new location. b. a payment that is automatically transferred from your bank account to pay a bill or some other obligation. c. a form of government spending that is not made in exchange for a currently produced good or service. d. the benefit that a person receives from an expenditure by government minus the taxes that were collected by government to fund that expenditure.

the economy's overall price level is rising.

Economists use the term inflation to describe a situation in which a. some prices are rising faster than others. b. the economy's overall price level is rising. c. the economy's overall price level is high, but not necessarily rising. d. the economy's overall output of goods and services is rising faster than the economy's overall price level.

then both GDP and consumption spending will be higher.

If you buy a burger and fries at your favorite fast food restaurant, a. then neither GDP nor consumption will be affected because you would have eaten at home had you not bought the meal at the restaurant. b. then GDP will be higher, but consumption spending will be unchanged. c. then GDP will be unchanged, but consumption spending will be higher. d. then both GDP and consumption spending will be higher.

$2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about a. $2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. b. $2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars. c. $2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars. d. $2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

The value of the consumer price index is always 100 in the base year.

In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct? a. The base year is always the first year among the years for which computations are being made. b. It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year. c. The value of the consumer price index is always 100 in the base year. d. The base year is always the year in which the cost of the basket was highest among the years for which computations are being made.

$40 million

In the economy of Wrexington in 2008, nominal GDP was $20 billion and the GDP deflator ratio was 500. What was Wrexington's real GDP in 2008? a. $2.5 million b. $10 million c. $40 million d. $100 million

increase less than will the consumer price index.

Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will a. increase less than will the consumer price index. b. increase more than will the consumer price index. c. not increase, but the consumer price index will increase. d. increase, but the consumer price index will not increase.

$20 million

Quality Motors is a Japanese-owned company that produces automobiles; all of its automobiles are produced in American plants. In 2007, Quality Motors produced $20 million worth of automobiles, with $12 million in sales to Americans, $6 million in sales to Canadians, and $2 million worth of automobiles added to Quality Motors' inventory. The transactions just described contribute how much to U.S. GDP for 2007? a. $12 million b. $14 million c. $20 million d. $34 million

take the Charlieville job

Scenario 24-4 Quinn has job offers in Wrexington and across the country in Charlieville. The Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in Charlieville is 90. Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power, then she should a. take the Charlieville job. b. take the Wrexington job. c. take either job because they both have the same purchasing power. d. The answer cannot be determined from the information given because a salary is not the same as purchasing power.

104.0.

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2004 was a. 96.2. b. 102.0. c. 104.0. d. 152.0.

the CPI better reflects the goods and services bought by consumers.

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because a. the CPI is easier to measure. b. the CPI is calculated more often than the GDP deflator is. c. the CPI better reflects the goods and services bought by consumers. d. the GDP deflator cannot be used to gauge inflation.

current level of prices relative to the level of prices in the base year.

The GDP deflator reflects the a. level of prices in the base year relative to the current level of prices. b. current level of prices relative to the level of prices in the base year. c. level of real output in the base year relative to the current level of real output. d. current level of real output relative to the level of real output in the base year.

1.6 percent

The consumer price index was 225 in 2006 and 236 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period? a. 1.6 percent b. 4.9 percent c. 6.82 percent d. 11.4 percent

percentage change in the price level from the previous period.

The economy's inflation rate is the a. price level in the current period. b. absolute change in the price level from the previous period. c. change in the gross domestic product from the previous period. d. percentage change in the price level from the previous period.

6.0 percent

The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate? a. 5.7 percent b. 6.0 percent c. 7.2 percent d. 27.2 percent

(ii) less than 1 percent.

The price of domestically produced DVD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by a. (i) more than 1 percent. b. (ii) less than 1 percent. c. (iii) 1 percent. d. None of (i), (ii), and (iii) is correct; this particular price increase will not affect the GDP deflator.

investment

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

percentage change in real GDP from one period to another.

When economists talk about growth in the economy, they measure that growth as the a. absolute change in nominal GDP from one period to another. b. percentage change in nominal GDP from one period to another. c. absolute change in real GDP from one period to another. d. percentage change in real GDP from one period to another.

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

When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d. can offset the effects of rising prices by saving more.

gross domestic product

Which of the following statistic is usually regarded as the best single measure of a society's economic well-being? a. the unemployment rate b. the inflation rate c. gross domestic product d. the trade deficit