Econ 2

A farmer sells sugar to a candy producer for $150. If the producer uses this sugar to make candy that sells for $200, what is the total contribution to GDP from these transactions?

$200

An American soldier stationed in North Carolina receives a paycheck from the federal government for $300, which she uses to purchase a $100 MP3 player made in China by a Chinese firm and $200 for fruit and vegetables from a local farmers market. As a result, U.S. GDP increases by a. $200 b. $300 c. $500 d. $600

a. $200

The price index was 220 in one year and 238.2 in the next year. What was the inflation rate? a. 8.3 percent b. 108.3 percent c. 4.8 percent d. 38.2 percent

a. 8.3 percent

Which of the following is a true statement? a. International data leave few doubts that a nation's GDP per person is associated with its citizens' standard of living. b. Rich and poor countries often have vastly different standards of living, but similar levels of real GDP per person. c. The value of leisure time is included in the calculation of GDP per person. d. International data indicate that measures on the distribution of income are closely associated with GDP per person.

a. International data leave few doubts that a nation's GDP per person is associated with its citizens' standard of living.

A tax of $1 on sellers shifts the supply curve upward by exactly $1. a. True b. False

a. True

In the calculation of the CPI, books are given greater weight than magazines if a. consumers buy more books than magazines b. the price of books is higher that the price of magazines c. it costs more to produce books than it costs to produce magazines d. books are more readily available than magazines to the typical consumer

a. consumers buy more books than magazines

Suppose that over the past year, the nominal interest rate was 5 percent, the CPI was 150.3 at the end of the year, and the CPI was 144.2 at the beginning of the year. It follows that a. the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 0.8 percent. b. the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 9.2 percent. c. the dollar value of savings increased at 0.8 percent, and the purchasing power of savings increased at 5 percent. d. the dollar value of savings increased at 9.2 percent, and the purchasing power of savings increased at 5 percent.

a. the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 0.8 percent.

Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power? a. $42,000 b. $65,625 c. $68,880 d. $189,000

b. $65,625

Indexation refers to a. a process of adjusting the nominal interest rate so that it is equal to the real interest rate. b. using a law or contract to automatically correct a dollar amount for the effects of inflation. c. using a price index to deflate dollar values. d. an adjustment made by the Burea of Labor Statistics to the CPI so that the index is in line with the GDP deflator.

b. using a law or contract to automatically correct a dollar amount for the effects of inflation.

In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods today cost $6.00, then which pair of CPIs would make the cost in today's dollars the same for both years? a.60 in 1972 and 150 today b.65 in 1972 and 156 today c.75 in 1972 and 160 today d.90 in 1972 and 145.8 today

b.65 in 1972 and 156 today

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows: a. Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate. b. Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. c. Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate. d. Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

c. Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

Net exports equal a. exports plus imports b. imports minus exports c. Y-(C+I+G) d. Y-(C-I-G)

c. Y-(C+I+G)

When policy makers set prices by legal decree, they a. are usually following the advice of mainstream economists. b. improve the organization of economic activity. c. obscure the signals that normally guide the allocation of society's resources. d. are demonstrating a willingness to sacrifice fairness for the sake of a gain in efficiency.

c. obscure the signals that normally guide the allocation of society's resources.

Which of the following is correct? Price controls a. always help those they are designed to help. b. never help those they are designed to help. c. often hurt those they are designed to help. d. always hurt those they are designed to help.

c. often hurt those they are designed to help.

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was a.-5 percent. b.-1 percent. c.5 percent. d.3.2 percent.

c.5 percent.

Social Security payments are indexed for inflation using the CPI. A recent newspaper editorial claimed that SocialSecurity recipients are harmed by years of low inflation because they do not receive as large an increase in their payments as they do in years of high inflation. Which of the following statements is correct? a.The newspaper editorial is correct under all circumstances. b.The newspaper editorial is correct if the market basket consumed by Social Security recipients is the same as the market basket used to compute the CPI. c.The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI d.The newspaper editorial is incorrect under all circumstances.

c.The newspaper editorial could be correct if the prices of the goods consumed by Social Security recipients change at a different rate than the prices of the goods in the market basket used to compute the CPI

Which of the following statements about the GDP is correct? a. GDP measures two things at once; the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. b. Money continuously flows from households to firms then back to households, and GDP measures this flow of money. c. GDP is generally regarded as the best single measure of a society's economic wellbeing. d. All of the above are correct.

d. All of the above are correct.

Which of the following is the most likely explanation for the imposition of a price floor on the market for corn? a. Policymakers have studied the effects of the price floor carefully, and they recognize that the price floor is advantageous for society as a whole. b. Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into imposing the price floor. c. Buyers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor. d. Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor.

d. Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor.

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following? a. try to include all the goods and services that the typical consumer buys. b. Try to weigh the goods and services that the typical consumer buys according to how much consumers buy of each item. c. Survey consumers to determine what the typical consumer buys. d. Survey sellers to determine what the typical consumer buys.

d. Survey sellers to determine what the typical consumer buys.

Categories of U.S. consumer spending, ranked from largest to smallest, are a. housing, food and beverages, education and communication, and transportation b. education and communication, housing, food and beverages, and transportation c. food and beverages, housing, transportation, and medical care d. housing, transportation, food and beverages and medical care

d. housing, transportation, food and beverages and medical care