Macroeconomics: Chapter 7 Practice
If nominal GDP increases by 5% a year and the GDP price index rises by 2% a year, then real GDP increases by ___
3% a year (5-2)
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
The nominal wage rate is the average _____ wage rate measured in _____ dollars. The real wage rate is the average _____ wage rate measured in the dollars of _____ year.
hourly; current hourly; a reference base
The PCE price index is an average of the current prices of _____ included in the consumption expenditure component of GDP, expressed as a percentage of _____ year prices.
the goods and services; base
When the nominal interest rate equals zero, the real interest rate equals _______.
the negative of the inflation rate
the CPI bias arises from all of the following items except _______. A. the goods and services bought by poor people Your answer is correct. B. the improved quality of goods C. consumers' responses to price changes D. the introduction of new goods and services
A. the goods and services bought by poor people
The BLS reported that the CPI in July 2010 was 226. This news tells you that _______. A. the prices of consumption goods and services have risen, on average, by 126 percent since the base year Your answer is correct. B. consumer prices during July were 226 percent higher than they were during the base year C. the CPI inflation rate in July was 26 percent a year D. consumer prices rose by 26 percent during the month of July
A. the prices of consumption goods and services have risen, on average, by 126 percent since the base year
The reference base period is a period for which the _____ is defined to equal _____. Currently, the reference base period is 1982-1984.
CPI; 100
The core inflation rate is the annual percentage change in the_____ price index_____ the prices of food and energy.
PCE; excluding
Of the alternative measures of the price level, _______ overcomes the bias of the CPI and is a better measure of the cost of living because it _______.
PCEPI; uses a current basket of all consumption goods
The GDP price index is an average of the current prices of _____ included in the GDP, expressed as a percentage of base year prices.
all the goods and services
The nominal interest rate is the dollar amount of interest expressed as a percentage of the amount _____. The real interest rate is the goods and services forgone in interest, expressed as a percentage of the amount _____ and calculated as the nominal interest rate minus the ____
loaned loaned; inflation rate
The real interest rate exceeds the nominal interest rate when the inflation rate is _______.
negative
When the price level _______ the inflation rate _______.
rises rapidly; is high
A cost of living index is a measure of the change in the amount of money that people need to spend to achieve a given _____.
standard of living
the CPI measures the average prices paid by ___ for ___
urban consumers; a fixed basket of consumption goods and services
