ECON (Chapter 7 and 8)

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if nominal GDP increases by percent a year and the GDP price index rises by 2 percent a year, then real GDP increase

3 percent a year

The CPI bias arises from

consumers' responses to price changes the introduction of new goods and services the improved quality of goods

When the SPI increases from 200 in 2010 in 2011 and the nominaal wage rate is constant at $10 an hour, the real wage rate

decreases by 5 percent

How does the PCE price index overcomes the bias of CPI and is a better representation of the cost of living?

it uses all current basket of all consumption goods

When the price level ____ the inflation rate_______

rises rapidly; is high

The BLS reported that the CPI in July 2010 was 226. the news tells you that

the prices of consumption goods and services have risen, on average, by 126 percent since the best year

The CPI measures the average prices paid by ______ for ______________

urban consumers; a fixed basket of consumption goods and services

when the price level is rising at ________ and the real interest rate is 1 percent a year, the nominal interest rate is 3 percent a year

2 percent a year


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