Principles of Economics Macro Exam 2

Which of the following would likely cause the CPI to rise more than the GDP deflator?

An increase in the price of Hondas produced in Japan and sold in the U.S.

If the workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than expected?

Firms will gain at the expense of workers

Thomas Robert Malthus

"food is necessary to the existence of man"

GDP is the sum of the market value of the

final goods and services

The CPI will be most influenced by a 10 percent increase in the price of which of the following consumption categories

housing

If your grandparents buy a new retirement house in Boca this transaction would affect

investment

U.S. GDP ( in contrast to GNP) measures the production and income of

people, factories, and farms located within the borders of the U.S.

The "basket" on which the CPI is based is composed of

products purchased by the typical consumer

CpI

reflects prices of all goods and services bought by consumers

Gdp Deflator

reflects the prices of all goods and services produced domestically

If there is an increase in the price of apples that causes consumers to purchase fewer apples and more oranges, the CPI's accuracy will suffer from

substitution bias

How is purchase of a 40,000 BMW produced entirely in Germany recorded in the U.S. GDP accounts

Consumption increases by 40,000 and net exports decrease by 40,000

GDP can be measured as the sum of

Consumption, investment, government purchases, and net exports

Under which of the following conditions would you prefer to be the borrower?

Nominal 20%, inflation rate 25%

Under which of the following conditions would you prefer to be the lender?

Nominal 5%, Inflation rate 1%

Which of the following statements is correct?

The real interest rate is the nominal interest rate minus the inflation rate

An increase in the minimum wage will cause a relatively large increase in unemployment among workers?

Unskilled workers if the demand for labor is relatively elastic

transfer payment

a payment made or income received in which no goods or services are being paid for, such as a benefit payment or subsidy(unemployment)

Real GDP is measured in ________ prices while nominal GDP is measured in _______ prices

base year;current year

inflation rate

cpi in year 2-cpi in year 1/ Cpi in year 1* 100