Economics ch 19

Suppose GDP was 10 trillion in 2000 (in 2000 dollars) and 15 trillion in 2010 (in 2010 dollars). If the country experienced 20% inflation over those ten years, what was the 2000 GDP expressed in 2010 dollars?

$12 trillion

Using 2000 as a base year, suppose the 2010 nominal GDP is 18 trillion and the 2010 real GDP is 15 trillion. What is the GDP deflator for the year 2000 to 2010?

120

What is a consequence of a rise in the CPI?

All of these answers

What describes the relationship between economic agents?

Circular flow describes how goods and service exchange hands and how economic agents are interconnected.

National income provides an indication of _______________

all of the answers

If the Consumer Price Index in a country was 186.5 at the end of last year and 179.8 at the end of this year, the country experienced which of the following?

A deflation rate of 3.4 percent

Which of the following best describes a cost-push inflation scenario?

Global wheat supplies are destroyed, and wheat is a necessary input for toaster pastries

Disposable income can be defined as:

Income left after deducting taxes and government fees.

Which of the following is an advantage of the GDP deflator over the CPI?

It does not suffer from substitution bias

Which of the following is an advantage of the CPI over the GDP deflator?

It is a more accurate reflection of the changes in the cost of living

Suppose inflation averages 2% over the course of five years. How will real GDP compare to nominal GDP?

Real GDP will be lower than nominal GDP

The distinction between real GDP and nominal GDP is important to determine which of the following?

The change in real production

The biases in the CPI can overstate inflation, because they do which of the following?

Tend to omit quality improvements, consumer response to changes in price, and new goods and services

Which of the following would cause substitution bias?

The price of HP computers declines while the price of Dell computers remains the same

GDP per capita is most useful for

comparing the average wealth of one country to another.