MACRO Test 2

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP?

$1200

Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for each lawn he mows. What's the total contribution to GDP each time Tim mows a yard?

$20

The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 10 bushels of peaches and 15 bushels of pecans. Year Price of Peaches Price of Pecans 2005 $11 per bushel $6 per bushel 2006 $9 per bushel $10 per bushel Refer to Table 24-1. The cost of the basket in 2006 was

$240.

The government of a country, which has adopted American GDP accounting conventions, reported that seasonally adjusted GDP in quarter 3 was $12 billion at an annual rate. This means that the seasonally-adjusted market value of all final goods and services produced within this country in quarter 3 was

$3 billion.

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is

$46,666.67

Consider two cars manufactured by Chevrolet in 2009. During 2009, Chevrolet sells one of the two cars to Sean for $24,000. Later in the same year, Sean sells the car to Kati for $19,000. The second automobile, with a market value of $30,000, is unsold at the end of 2010 and it remains in Chevrolet's inventory. The transactions just described contribute how much to GDP for 2009?

$54,000

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2001 salary in 2006 dollars is

$75,000.00.

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

-2 percent.

The table below reports nominal and real GDP for the U.S. from 1929 to 1932. Year Nominal GDP Real GDP 1929 103.6 977 1930 91.2 892.8 1931 76.5 834.9 1932 58.7 725.8 What was the growth rate of real GDP for 1930?

-8.62%. Real GDP is a better gauge of economic well-being than nominal GDP.

Table 24-2 The table below pertains to Iowan, an economy in which the typical consumer's basket consists of 3 pounds of pork and 4 bushels of corn. Year Price of Pork Price of Corn 2008 $20 per pound $12 per bushel 2009 $25 per pound $18 per bushel Refer to Table 24-2. If 2009 is the base year, then the CPI for 2009 was

100

The table below pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. Year Price of Meat Price of a Toy 2004 $3 per pound $2 2005 $1 per pound $7 2006 $4 per pound $5 If the base year is 2004, then the CPI in 2004 was

100

If the nominal interest rate is 6 percent and the rate of inflation is 4 percent, then the real interest rate is

2 percent

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

2.5 percent.

The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 10 bushels of peaches and 15 bushels of pecans. Year Price of Peaches Price of Pecans 2005 $11 per bushel $6 per bushel 2006 $9 per bushel $10 per bushel Refer to Table 24-1. If 2006 is the base year, then the inflation rate in 2006 was

20 percent.

The table below pertains to Pieway, an economy in which the typical consumer's basket consists of 10 bushels of peaches and 15 bushels of pecans. Year Price of Peaches Price of Pecans 2005 $11 per bushel $6 per bushel 2006 $9 per bushel $10 per bushel If 2006 is the base year, then the inflation rate in 2006 was

20 percent.

A worker received $5 for a daily wage in 1930, which has the equivalent value of $63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to the nearest whole number?

215

For an imaginary economy, the value of the consumer price index was 140 in 2006 and 149.10 in 2007. The economy's inflation rate for 2007 was

6.5 percent.

The table below pertains to Studious, an economy in which the typical consumer's basket consists of 5 books and 10 calculators. Year Price of a Book Price of a Calculator 2006 $24 $8 2007 $30 $12 2008 $32 $15 Refer to Table 24-3. If 2008 is the base year, then the consumer price index was

64.5 in 2006, 87.1 in 2007, and 100 in 2008.

The table below reports nominal and real GDP for the U.S. from 1929 to 1932. Year Nominal GDP Real GDP 1929 103.6 977 1930 91.2 892.8 1931 76.5 834.9 1932 58.7 725.8 What is the GDP deflator and the inflation rate for 1932?

8.09, -11.7

Which of the following domestically produced items is not included in GDP?

All of the above are included in GD

Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which it used to bake bread that customers purchased. In which case will the flour be counted as a final good?

Janet's purchase but not ABC Bakery's purchase.

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in

Mexican GDP, but it is not included in U.S. GDP.

Ralph pays someone to mow his lawn, while Mike mows his own lawn. Regarding these two practices, which of the following statements is correct?

Only Ralph's payments are included in GDP.

The Patersons bought a home that was newly constructed in 2007 for $275,000. They sold the home in 2009 for $205,000. Which of the following statements is correct regarding the sale of the house?

The 2009 sale affected neither 2007 GDP nor 2009 GDP.

GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in Connecticut that uses workers who live in Connecticut. As a result,

U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount.

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

U.S. investment and GDP increase, but German GDP is unaffected.

Which of the following is not an example of a nondurable good?

a microwave

Which of the following is a way to compute GDP?

add up the market values of all final goods and services

A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by

adjusting the price of the good to account for the quality change.

An increase in the price of dairy products produced domestically will be reflected in

both the GDP deflator and the consumer price index.

The inflation rate is calculated

by determining the percentage increase in the price index from the preceding period.

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing.

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.

Government purchases include spending on goods and services by

federal, state, and local governments.

When the consumer price index rises, the typical family

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

By far the largest category of goods and services in the CPI basket is

housing.

Grapes are considered intermediate goods

if the purchaser uses them to make wine to sell others but not if the purchaser eats them.

After the terrorist attacks on September 11, 2001, governments within the United States raised expenditures to increase security at airports. These purchases of goods and services are

included in GDP since government expenditures on goods and services are included in GDP.

If an economy's GDP falls, then it must be the case that the economy's

income and expenditure both fall.

To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant?

introduction of new goods

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

introduction of new goods

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

introduction of new goods.

GDP

is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being.

The consumer price index is used to

monitor changes in the cost of living over time.

Changes in the GDP deflator reflect

only changes in prices.

The economy's inflation rate is the

percentage change in the price level from the previous period.

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2008. Prices and Quantities Year Price of Cereal Quantity of Cereal Price of Milk Quantity of Milk 2008 $4.00 90 $1.50 150 2009 $4.00 100 $2.00 180 2010 $5.00 120 $2.50 200 2011 $6.00 150 $3.50 200 In 2010, this country's

real GDP was $780, and the GDP deflator was 141.0.

A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 120 in 2009. Between 2009 and 2010,

real output and the price level both rose.

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,

real output rose and the price level fell.

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

rises and the cost of living decreases.

Which of the following is included in the investment component of GDP?

spending on new residential construction but not spending on stocks and bonds

Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant?

substitution bias

A decrease in the price of domestically produced nuclear reactors will be reflected in

the GDP deflator but not in the consumer price index.

Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

the consumer price index will increase in the future.

The CPI is a measure of the overall cost of

the goods and services purchased by a typical consumer.

What basket of goods and services is used to construct the CPI?

the goods and services that are typically bought by consumers as determined by government surveys

A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In which quarter(s) does(do) these transactions raise consumption?

the second but not the first