Econ chapter 6

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Estimates of the overstatement of cost of living by the CPI suggest the magnitude of the overstatement is roughly

1.0 percentage points

If a market basket was defined in 2018 and it cost $10,000 to purchase the items in that basket in 2018, while it cost $11,000 to purchase those identical goods in 2019, then the price index for the base year is

100

Using Table 6.1, from the 1982-1984 base to 2004, prices increased CPI 1982-1984=100

90.3%.

Which of the following can make the unemployment rate fall?

A decrease in the number of people who are looking for work and an increase in the number of people with jobs.

Which of the following can make the unemployment rate rise?

An increase in the number of people who are looking for work and a decrease in the number of people with jobs

A reason why the CPI overstates the cost of living is that the

BLS audits prices in the same types of stores, rather than shift to cheaper outlets

The expenditures approach to GDP equals

Consumption + Gross Investment + Government Purchases + Net Exports

An educated guess at what the price of some good might be, based upon its characteristics, is called

a hedonic price

If the price of gasoline has increased from $3 per gallon to $4 per gallon at the same time that the overall price index increased from 200 to 300, then you know that the inflation adjusted price of gasoline has

decreased

Which of these would economists consider the worst?

depression

If the unemployment rate falls because the number of people not working but searching for work falls, economists would attribute this to the

discouraged worker effect

One of the reasons that Real Gross Domestic Product is not synonymous with social welfare is

environmental quality is ignored

During the period from 2000 to today the Labor Force Participation Rate

fell

If the price of gasoline has increased from $3 per gallon to $4 per gallon at the same time that the overall price index increased from 200 to 250, then you know that the inflation adjusted price of gasoline has

increased

One subject of study for macroeconomics is

inflation

One problem with using Real Gross Domestic Product as a measure of social welfare is that

it fails to count home production

If the inflation rate turns out to be less than was is expected to be, the clear winners are

lenders

A reason why the CPI overstates the cost of living is it

makes no attempt to control for the fact that sales often occur on holidays.

According to the Bureau of Labor Statistics, the Consumer Price Index was

never intended to measure increases in the cost of living, but many use it that way.

A CPI miscalculation that overstates its increase by 0.8 percentage points will cause

tax brackets cutoffs to rise too quickly.

The consumer price index is computed by

the Bureau of Labor Statistics.

There were large decreases in productivity during

the late 1970s and the 2010s.

One of the reasons that Real Gross Domestic Product is not synonymous with social welfare is

the underground economy (unreported and illegal income and sales) is not counted

Traditionally, a recession defined by declining Real GDP lasts over a period of at least

two consecutive calendar quarters

If a person is unemployed because their industry has moved to another country, economists refer to the person as

structurally unemployed

If a market basket was defined in 2018 and it cost $10,000 to purchase the items in that basket in 2018, while it cost $11,000 to purchase those identical goods in 2019, then the inflation rate from 2018 to 2019 is

(110-100)/100*100%=10%.

If a market basket was defined in 2018 and it cost $10,000 to purchase the items in that basket in 2018, while it cost $11,000 to purchase those identical goods in 2019, then the price index for 2019 is

(11000/10000)*100=110

A 15-year old that wants a job but can't find one is

not included at all in the unemployment rate

The adjustments made recently by the BLS to mitigate the overstatement of the cost-of-living by the CPI

reduced the estimated overstatement from 1.1% to .8%.


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