Economics midterm 3
The CPI in 1930 equaled 0.17. The CPI in 1931 equaled 0.15. The rate of inflation between 1930 and 1931 was
-11.8 percent
A particularly strong expansion is called a
boom
Long-lived goods used for producing other goods and services are called
capital goods
The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the
consumer price index
A nations central bank
controls a nation's monetary policy
Fiscal policy refers to
decisions to determine the government's budget
When government revenue is less than the government spending, the nation had a
government budget deficit
Structural policy refers to
government policies aimed at changing the underlying structure or institutions of the economy
All of the following describe economic conditions during the great depression in the united states except
high rates of inflation
The four categories of the final users of GDP are
households, firms, governments, and the foreign sector
A real quantity is measured
in physical terms
Macroeconomics first developed as a new sub field of economics
in response to the severe economic hardships of the great depression
A nominal quantity is measured
in terms of current dollar value
Goods and services provided by the state and local governments are
included in GDP at cost
If the total expenditures of a typical family equaled $35,000 per year in 2010 and the exact same basket of goods and services cost $40,000 in the year 2015, the family's cost of living
increased by 14 percent
Since 1950, the standard of living in the United States has
increased when measured by both total output and output per person
The price of a gallon of gasoline at the pump increased by 10% at the same time the inflation rate was 5%. The nominal price of gasoline ___, and the real price of gasoline ___
increased, decreased
One family earned an income of $28,000 in 1990. Over the next five years, their income increased by 15%, while the CPI increased by 12%. After five years, this family's nominal income ______, and their real income ______.
increased, increased
When consumers substitute a cheaper food for a more expensive one, the CPI will ___ the change in the cost of living
overstate
When statistics fail to allow for the possibility that consumers switch from products with rising prices to those whose prices are stable or falling, the CPI will tend to ___ the rate of inflation
overstate
The degree to which people have access to goods and services that make their lives easier, healthier, safer, and more enjoyable is called the
standard of living
Decisions to reduce the money supply are made by _____ and are an example of _____ policy
the Federal Reserve; monetary
The shoe leather costs of inflation include all of the following except
the lost purchasing power of cash
Macroeconomic policies are government policies designed to affect
the performance of the economy as a whole
A trade imbalance occurs when
the quantity of a country's exports differs significantly from the quantity of imports
If the CPI equaled 1.00 in 1995 and 1.65 in 2005 and a typical household's income equaled $35,000 in 1995 and $40,000 in 2005, then between 1995 and 2005, real household income
decreased
If workers received a 5 percent wage increase and the rate of inflation was 10 percent, then their real wage
decreased
The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2019, pizzas cost $10 each, jeans cost $40 per pair and milk cost $3 per gallon. In 2020, the price of pizzas went down $8 each while the price of jeans and milk remained the same. Between 2020, a typical family's cost of living
decreased by 4.5 percent
A trade deficit occurs when
exports are less than imports
Goods and services that are consumed by the ultimate user are called ___ goods and services
final
A decrease in the federal income tax is an example of ___ policy
fiscal
If the consumer price index increased from 1.52 to 1.65, then it must be the case that ___ relative to prices in the base year
the weighted average level of prices rose
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the value added of the corner store?
$0.50
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the value added of Citrus growers incorporated?
$0.75
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the value added of Florida Jam Company?
$1.25
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process. What is the sum of the value added of all the firms?
$2.50
If an automobile manufacturer pays $200 for a car windshield, $400 for four car tires, $100 for a car CD player, and sells cars made with these parts for $20,000, then each car the automobile manufacturer sells contributes how much to GDP?
$20,000
In 2019, Pete Rich purchased a 1642 painting by Rembrandt for $20 million. He also paid a 1 percent commission to the auction house that sold the painting. What was the contribution of these transactions to the GDP in the year 2019?
$200,000
If the Citrus Growers Association grows $1 million worth of oranges, sells $500,000 worth of oranges to consumers, uses the rest to make orange juice that is sold to consumers for $3 million, Citrus Grower's contribution to GDP is
$3,500,000
Suppose that the total production of an economy consists of 4 oranges and 10 candy bars, each orange sells for $0.25, and each candy bar sells for $0.50. What is the market value of production in this economy?
$6.00
Suppose that the total expenditures for a typical household in 2018 equaled $2,500 per month, while the cost of purchasing exactly the same items in 2020 was $3,000. If 2018 is the base year, the CPI for 2020 equals
1.20
The CPI in 1974 equaled 0.49. The CPI in 1975 equaled 0.54. The rate of inflation between 1974 and 1975 was
10.2 percent
The CPI in year one equaled 1.45. The CPI in year two equaled 1.51. The rate of inflation between years 1 and 2 was
4.1 percent
Decisions to cut taxes are made by _____ and are an example of _____ policy
Congress; fiscal
Which of the following is not classified as a final good?
Fresh vegetables purchased by a restaurant
Which of the following transactions would be included in the GDP of the United States?
Honda produces cars in Ohio
Normative analysis
addresses the question of whether a policy should be used
Macroeconomists are more likely than microeconomists to deal with
aggregation
Positive analysis
aims at determining only the economic consequences of a particular policy
The additional goods and services produced by women in the United States as their labor force participation increases represent
an increase in economic activity
The CPI is a measure of the
average level of prices relative to prices in the base year
To compare the purchasing power of nominal wages in two different years, one must
deflate both quantities by a common price index
A particularly severe recession is called a
depression
Monetary policy refers to
determination of the nation's money supply
The process of steady increase in the quantity and quality of goods and services the economy can produce is called
economic growth
Macroeconomic issues include all of the following except
energy reserves
If you wish to maintain a constant purchasing power when you retire, you should choose retirement income options that are
indexed
The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index if called
indexing
Two methods used to adjust nominal values for inflation are
indexing and deflating
The annual percentage rate of change in the price level is the
inflation rate
The rate at which proves in general are increasing is called the
inflation rate
Government actions designed to affect the performance of the economy as a whole are called
macroeconomic policies
Gross Domestic Product (GDP) equals the ___ of the final ___ produced within a country during a given period of time
market value; goods and services
An increase in interest rates by the Federal Reserve is an example of ____ policy
monetary
Deflating a nominal quantity is the process of dividing a ___ quantity by a ___ in order to express quantity in ___ terms
nominal; price index; real
A drawback of using market values to aggregate the quantities of goods and services produced in an economy is that
not all economically valuable goods and services are bought and sold in markets
average labor productivity equals
output per employed worker
The standard of living in an economy is best measured by
output per person
Average consumption in an economy is best measured by ____ while average productivity in an economy is best measured by ____
output per person, output per worker
Among economists today, the most widely accepted cause of the Great Depression is
poor economic policy making
If Country A and Country B have the same total output, then the standard of living in these two countries can be different depending on
population size
"The plan to create private accounts in Social Security will reduce benefits for some workers," is an example of a ________ statement, while "Social Security will be better if the private accounts are allowed" is an example of a ________ statement
positive; normative
A measure of the average price of a given class of goods or services relative to the price of the same goods and services in a base year is called a
price index
The value added by any firm equals the firm's ___ from selling the product minus ___
revenue, the cost of inputs purchased from other firms
Unemployment typically _______ during a recession
rises
GDP is a measure of an economy's:
total output
The fraction of people who would like to be employed but can find work is called the
unemployment rate
intermediate goods and services are ___ production and ___ counted in GDP
used up in the process of; are not
Great Depression
was a period of low production and high unemployment