Econ 261 exam 2 (Chapter 10,11,12,13,20)

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Shortcomings of GDP as a Measure of Well-Being:

1. The value of leisure is NOT included in GDP. 2. GDP is not adjusted for pollution or other negative effects of production. 3. GDP is not adjusted for changes in crime and other social problems. 4. GDP measures the size of the pie but not how the pie is divided up

If the price of Italian shoes imported into the United States increases, then

the consumer price index will increase, but the GDP deflator will not increase.

GDP does not reflect

the value of leisure. the value of goods and services produced at home. the quality of the environment. (ALL THE ABOVE)

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows

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

The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers

Is a correct statement dealing with CPI and GPD

Which of the following statements about real and nominal interest rates is correct?

When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate.

the calculation of the CPI, coffee is given greater weight than tea if

consumers buy more coffee than tea.

Gross domestic product (GDP)

is the market value of all final goods and services produced within a country in a given period of time


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