ECONOMICS FINAL (REVIEW 3) – Flashcards
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The consumer price index is used to
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turn dollar figures into meaningful measures of purchasing power
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when the consumer price index rises, the typical family
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has to spend more dollars to maintain the same standard of living
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economists use the term inflation to describe a situation in which
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the economy's overall price level is rising
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the inflation rate is defined as the
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percentage change in the price level from the previous period
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which of the following statements is correct?
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the CPI can be used to compare dollar figures from different points in time
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The CPI is a measure of the overall cost of the goods and services bought by
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a typical consumer
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Which of the following agencies calculates the CPI?
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the bureau of labor statistics
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The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:
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fix the basket, find the prices, compute the basket's cost, choose a base year and compute the basket's cost, and compute the index
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If 2010 is the base year, then the inflation rate in 2015 equals
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CPI in 2015 - CPI in 2014
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CPI in 2014
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Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. in 2012, the basket's cost was $50; in 2014, the basket's cost was $52; and in 2016, the basket's cost was $55. the value of the CPI in 2016 was
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110
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Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. in 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. the value of the CPI in 2015 was
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104.6 and the inflation rate was 4.6%
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Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is
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$46,666.67
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Which of the following statements is correct about the relationship between the nominal interest rate and the real interest rate?
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The real interest rate is the nominal interest rate minus the rate of inflation
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Productivity is the amount of goods and services
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produced for each hour of a worker's time. it is linked to a nation's economic policies
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A nation's standard of living is best measured by its
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real GDP per person
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An understanding of the best ways to produce goods and services is called
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technology
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Perry accumulated a lot of mathematical skills while in high school, college, and graduate school. Economists include these skills as past of Perry's
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human capital
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Which of the following statements about inputs is correct?
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a forest is an example of a natural resource; it is also an example of a renewable resource
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Which of the following lists contains, in this order, natural resources, human capital, and physical capital?
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for a furniture company; wood, the skills and knowledge of its workers, saws.
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If there are diminishing returns to capital, then
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increases in the capital stock increase output by ever smaller amounts
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Which of the following is not a question addressed by macroeconomists?
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what is the impact of foreign competition on the US auto industry?
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For the economy as a whole,
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expenditure must equal income
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because every transaction has a buyer and a seller,
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every transaction contributes equally to an economy's income and to its expenditure
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according to the circular-flow diagram GDP
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can be compared as the total income paid by firms or as expenditures on final goods and services
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which of the following is a way to compute GDP?
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add up the market values of all final goods and services
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suppose that an economy produces 20,000 unites of good A which sells at $3 a unit and 40,000 units of good B which sells at $1 per unit. production of good A contributes
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3/2 times as much to GDP as the production of good B
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which of the following is included in the calculation of GDP?
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the purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.
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suppose an apartment complex converts to a condominium, so that the former refers are now owners of their housing units. suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. what happens to GDP as a result of this conversion?
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GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of owner occupied housing services.
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Ryan lives in an apartment where he pays $7,000 a year in rent. sarah lives in a house that could be rented for $21,000 a year. how much do these housing services contribute to GDP?
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$28,000
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Most goods and services produced at home
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and most goods and services produced illegally are excluded from GDP
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Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. this change in behavior, by itself, has
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increased measured GDP by the value added by the restaurants preparation and seeing of the meals
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a farmer sells $25,000 worth of apples to individuals who take them home to eat, $50,000 worth of apples to a company that uses them all to produce cider, and $75,000 worth of apples to a grocery store that will sell them to households. how much of the farmer's sales will be included as apples in GDP?
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$25,000
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One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake bread that is sold for $3 to consumers. a second bag of flour is sold for $1 to a grocery store who sells it to a consumer for $2. taking these four transactions into account, what is the effect on GDP?
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GDP increases by $5.00
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which of the following is included in Singapore's GDP?
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the value of production by an American working in singapore
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Martin, a US citizen, travels to mexico and buys a newly manufactured motorcycle made there. his purchase is included in
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mexican GDP, but it is not included in US GDP
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the primary economic function of the financial system is to
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match one person's saving with another person's investment
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Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a
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borrower or as a demander of funds
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when a large, well-known corporation wishes to borrow directly from the public, it can
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sell bonds
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the economy's two most important financial markets are
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the bond market and the stock market
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if the government's expenditures exceeded its receipts, it would likely
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sell bonds directly to the public
