Macro Policy EXAM 1

Consider each of the following transactions. Are they part of consumption, investment, government spending, exports, imports, or of none of them? The local government decides to cover all potholes

Government spending

Consider each of the following transactions. Are they part of the CPI, the GDP deflator, neither or both? Do these measures increase, decrease, or remain unchanged after each of the transactions? The price of Mexican beer increases

Increases CPI, leaves GDP deflator unchanged

Consider each of the following transactions. Are they part of the CPI, the GDP deflator, neither or both? Do these measures increase, decrease, or remain unchanged after each of the transactions? The price of Boeing's 707 increases

Increases GDP deflator, leaves CPI unchanged

Consider each of the following transactions. Are they part of the CPI, the GDP deflator, neither or both? Do these measures increase, decrease, or remain unchanged after each of the transactions? The price of new homes in Atlanta increases

Increases the GDP deflator and the CPI

Real GDP means the values of goods and services is measured in ____ prices.

constant

Nominal GDP means the value of goods and services is measured in ___ prices.

current

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:

do not have a job, but have looked for work in the past 4 weeks.

An increase in the price of imported goods will show up in:

the CPI but not in the GDP deflator.

Consider each of the following transactions. Are they part of consumption, investment, government spending, exports, imports, or of none of them? You buy a six pack of Budweiser

Consumption

Consider each of the following transactions. Are they part of consumption, investment, government spending, exports, imports, or of none of them? You buy a six pack of Corona beer

Consumption AND imports

Consider each of the following transactions. Are they part of the CPI, the GDP deflator, neither or both? Do these measures increase, decrease, or remain unchanged after each of the transactions? The price of crayons made in the US decreases

Decreases the GDP deflator and the CPI

Are the following people employed, unemployed or not in the labor force? Eugene who is on vacation in Puerto Rico from his job at Chase

Employed

The market value of all final goods and services produced within an economy in a given period of time is called:

GDP

If nominal GDP in 2009 equals $14 trillion and real GDP in 2009 equals $11 trillion, what is the value of the GDP deflator?

Nominal GDP/Real DP *100 14/11*100= 1.27

Consider each of the following transactions. Are they part of consumption, investment, government spending, exports, imports, or of none of them? Adam buys a new cordless drill for his business

Non-residential investment

Are the following people employed, unemployed or not in the labor force? Jack a full time student not looking for work.

Not in the labor force

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was

Real GDP in 2002 Prices= Quantity of oranges in 2009* price of oranges in 2002+Quantity of apples in 2009* price of apples in 2002 =4*1+5*0.5=$6.5

Consider each of the following transactions. Are they part of consumption, investment, government spending, exports, imports, or of none of them? Your professor buys a new house

Residential investment

The national income accounts identity, for an open economy, is:

Y = C + I + G + NX.

Bob bought $5000 worth of Adobe Systems stock. This transaction was brokered by John, who received $50 for his help. I think the $5000 should be included in GDP, and the $50 should not be included in GDP. State whether I am right or wrong with an explanation for your answer.

The statement is wrong. The buying of shares does not contribute anything new to the economy: it is just transferring partial ownership from Adobe to Bob, so it will not be included in GDP. Help provided by John was actually a service, which add to the total output of the economy, and so $50 will be added to the GDP.

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ______ percent.

Unemp. + Total emp.= Labor Force 9.4+117.6=127 Unemployed/Labor Force=Unemployment Rate 9.4/127 =7.4

Are the following people employed, unemployed or not in the labor force? Adam who is on layoff but is expecting to be called back to work soon (fingers crossed).

Unemployed

Consider an economy that produces apples, bananas, and coffee. The prices and quantities consume in 2016 and 2017 are given in the table below. 2016 2017 Product P Q P Q Apples 1 20 1.5 15 Bananas 1 20 1.2 18 Coffee 2 40 1.8 50 Using 2016 as the base year, calculate the consumer price index for 2017

[ ( 1.5*20 + 1.2*20 + 1.8*40 ) ] / [ ( 1*20 + 1*20 + 2*40)] * 100 = [(30 + 24 + 72 ) / 120] * 100 =(126 / 120) * 100 = 105

Consider an economy that produces apples, bananas, and coffee. The prices and quantities consume in 2016 and 2017 are given in the table below. 2016 2017 Product P Q P Q Apples 1 20 1.5 15 Bananas 1 20 1.2 18 Coffee 2 40 1.8 50 Using 2016 as the base year, calculate the consumer price index for 2016.

[(1*20 + 1*20 + 2*40) / (1*20 + 1*20 + 2*40)] * 100 = 100 [(1*20 + 1*20 + 2*40) / (1*20 + 1*20 + 2*40)] * 100 = 100 (100 * 100 )^1/2 = 100

According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person:

is going to school full time.

The labor force equals the:

number of employed and unemployed individuals.