ECO 2305 Test 3 – Flashcards
Unlock all answers in this set
Unlock answersquestion
economy-wide phenomena.
answer
Macroeconomists study
question
Why do wages differ across industries?
answer
Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?
question
Why does the price of oil rise when war erupts in the Middle East?
answer
Which of the following is not a question that macroeconomists address?
question
gross domestic product
answer
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
question
income and expenditures.
answer
Gross domestic product measures
question
always equal because every transaction has a buyer and a seller.
answer
In a simple circular-flow diagram, total income and total expenditure are
question
value of all final goods and services produced within a country in a given period of time.
answer
GDP is defined as the
question
$28,000
answer
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?
question
and most goods and services produced illegally are excluded from GDP
answer
Most goods and services produced at home
question
carrots grown in your garden and eaten by your family
answer
Which of the following is not included in GDP?
question
if the purchaser uses them to make wine to sell others but not if the purchaser eats them.
answer
Grapes are considered intermediate goods
question
oranges sold by a farmer to a grocery store.
answer
Which of the following transactions is not included in GDP?
question
The value of production by an American working in Singapore
answer
Which of the following is included in Singapore's GDP?
question
- the market value of all final goods and services produced within a country in a given period of time. - Y - C + I + G + NX.
answer
GDP is equal to
question
durable goods, nondurable goods, and services
answer
The consumption component of GDP includes spending on
question
- household purchases of appliances. - household purchases of medical care. - household purchases of food. - All of the above are included in the consumption component of GDP
answer
Which of the following is included in the consumption component of GDP?
question
capital equipment, inventories, and structures, including household purchases of new housing
answer
For the purpose of calculating GDP, investment is spending on
question
purchases of new houses.
answer
Consumption consists of spending by households on goods and services, with the exception of
question
the services of a U.S. government attorney valued at the cost of her salary
answer
Which of the following is included in government purchases?
question
a form of government spending that is not made in exchange for a currently produced good or service
answer
A transfer payment is
question
excluded from GDP because they do not reflect the economy's production
answer
Social Security payments are
question
not part of GDP because it is a transfer payment.
answer
Unemployment compensation is
question
The government sends your grandfather his Social Security check
answer
Which of the following represents a transfer payment?
question
exports minus imports
answer
Net exports equal
question
$2400
answer
In the economy of Talikastan in 2015, consumption was $6000, exports were $1000, GDP was $10,000, government purchases were $1800, and imports were $1200. What was Talikastan's investment in 2015?
question
$1450
answer
In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400. What was Talikastan's GDP in 2015?
question
$150
answer
In the economy of Talikastan in 2015, consumption was $600, exports were $300, GDP was $1300, government purchases were $250, and investment was $300. What were Talikastan's imports in 2015?
question
-$250
answer
In the economy of Talikastan in 2015, consumption was $1000, GDP was $1950, government purchases were $500, and investment was $700. What were Talikastan's net exports in 2015?
question
both changes in prices and changes in the amounts being produced.
answer
Changes in nominal GDP reflect
question
only changes in the amounts being produced
answer
Changes in real GDP reflect
question
only changes in prices
answer
Changes in the GDP deflator reflect
question
100
answer
In the base year, the GDP deflator is always
question
inflation
answer
The term economists use to describe a situation in which the economy's overall price level is rising is
question
96.1 so prices are lower than in the base year
answer
If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is
question
$15 billion.
answer
If in some year nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?
question
250.
answer
If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator?
question
nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.
answer
Suppose an economy's production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,
question
nominal GDP to real GDP multiplied by 100
answer
The GDP deflator is the ratio of
question
GDP per person
answer
GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is
question
True
answer
T/F: GDP excludes the value of intermediate goods because their value is included in the value of final goods
question
False
answer
T/F: While GDP includes tangible goods such as books and bug spray, it excludes intangible services such as the services provided by teachers and exterminators.
question
False
answer
T/F: When an American doctor opens a practice in Canada, his production there is part of U.S. GDP.
question
False
answer
T/F: An increase in nominal U.S. GDP necessarily implies that the United States is producing a larger output of goods and services.
question
False
answer
T/F: Nominal GDP uses constant base-year prices to place a value on the economy's production of goods and services, while real GDP uses current prices to place a value on the economy's production of goods and services.
question
True
answer
T/F: Real GDP is a better gauge of economic well-being than is nominal GDP
question
False
answer
T/F: Economists use the term inflation to describe a situation in which the economy's overall production level is rising.
question
True
answer
T/F: Real GDP per person tells us the income and expenditure of the average person in the economy
question
monitor changes in the cost of living over time
answer
The consumer price index is used to
question
has to spend more dollars to maintain the same standard of living
answer
When the consumer price index rises, the typical family
question
the economy's overall price level is rising
answer
Economists use the term inflation to describe a situation in which
question
percentage change in the price level from the previous period
answer
The inflation rate is defined as the
question
the CPI better reflects the goods and services bought by consumers
answer
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
question
the goods and services purchased by a typical consumer.
answer
The CPI is a measure of the overall cost of
question
the Bureau of Labor Statistics
answer
Which of the following agencies calculates the CPI?
question
surveying consumers
answer
In calculating the CPI, a fixed basket of goods and services is used. The quantities of the goods and services in the fixed basket are determined by
question
the goods and services that are typically bought by consumers as determined by government surveys
answer
What basket of goods and services is used to construct the CPI?
question
the prices of the goods and services
answer
When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?
question
The value of the consumer price index is always 100 in the base year.
answer
In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?
question
(Price of basket of goods and services in current year/price of basket in base year) X 100
answer
Which of the following is the correct formula for calculating the consumer price index?
question
- 100 in 2012. - 105 in 2013. - 109.5 in 2014.
answer
Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base year. In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was
question
(CPI in year 2 - CPI in year 1/CPI in year 1) X 100
answer
Which of the following is the correct formula for calculating the inflation rate?
question
5.0 percent
answer
The price index was 120 in 2012 and 126 in 2013. What was the inflation rate in 2013?
question
11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.
answer
If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced
question
housing, transportation, and food & beverages
answer
In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are
question
substitution bias.
answer
One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called
question
the GDP deflator and the consumer price index
answer
Two alternative measures of the overall level of prices are
question
the consumer price index will increase, but the GDP deflator will not increase.
answer
If the price of Italian shoes imported into the United States increases, then
question
the GDP deflator but not in the consumer price index.
answer
A decrease in the price of domestically produced nuclear reactors will be reflected in
question
both the GDP deflator and the consumer price index.
answer
An increase in the price of bread produced domestically will be reflected in
question
True
answer
T/F: Inflation can be measured using either the GDP deflator or the consumer price index.
question
True
answer
T/F: The Bureau of Labor Statistics is part of the U.S. Department of Labor
question
True
answer
T/F: The CPI for 2008 is computed by dividing the price of the basket of goods and services in 2008 by the price of the basket of goods and services in the base year, then multiplying by 100.
question
the GDP deflator reflects prices for all goods and services produced domestically and the consumer price index reflects prices for some goods and services bought by consumers.
answer
One of the differences between the GDP deflator and the consumer price index is
question
True
answer
T/F: The inflation rate for 2007 is computed by dividing (the CPI in 2007 minus the CPI in 2006) by the CPI in 2006, then multiplying by 100.
question
CPI in 2013 = 210; CPI in 2014 = 231
answer
Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 10 percent for 2014?
question
False
answer
T/F: If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.
question
True
answer
T/F: The goal of the consumer price index is to gauge how much incomes must rise to maintain a constant standard of living.
question
True
answer
T/F: Substitution bias occurs because the CPI ignores the possibility of consumer substitution toward goods that have become relatively less expensive
question
True
answer
T/F: The group of goods and services used to compute the GDP deflator changes automatically over time, but the group of goods and services used to compute the CPI does not.
question
True
answer
T/F: Consumer Price Index (CPI) = (Price of basket of goods and services in current year/Price of basket in base year) X 100
question
False
answer
T/F: CPI = (Price of basket goods and services in base year/Price of basket in current year) X 100
question
the productivity of its workers
answer
A nation's standard of living is determined by
question
real GDP per person
answer
A nation's standard of living is best measured by its
question
growth rate of real GDP per person.
answer
Which of the following measures how the level of well-being in a country has changed over time?
question
the United Kingdom.
answer
In 1870, the richest country in the world was
question
10 percent
answer
Last year real GDP in the imaginary nation of Populia was 907.5 billion and the population was 3.3 million. The year before real GDP was 750 billion and the population was 3 million. What was the growth rate of real GDP per person during the year?
question
productivity.
answer
The one variable that stands out as the most significant explanation of large variations in living standards around the world is
question
goods and services produced from each unit of labor input.
answer
Productivity is defined as the quantity of
question
Divide the quantity of output by the number of hours worked.
answer
Which of the following is a correct way to measure productivity?
question
1/3 laptop per hour
answer
In one day Portal Computer Company made 400 laptops with 1200 hours of labor. What was its productivity?
question
the computer a secretary uses
answer
Which of the following is an example of physical capital?
question
physical capital
answer
The equipment and structures available to produce goods and services are called
question
knowledge and skills that workers acquire through education, training, and experience.
answer
Human capital is the
question
the things she learned at some prestigious university
answer
Which of the following is a part of your economics professor's human capital?
question
natural resources
answer
The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called
question
technology
answer
An understanding of the best ways to produce goods and services is called
question
human capital but not technological knowledge
answer
Matt is going to college to become a pharmacist. What he learns about existing information increases
question
technological knowledge
answer
Amy discovers a new way to produce water heaters so they are less expensive and use less natural gas. Amy's discovery is
question
- human capital per worker - physical capital per worker - natural resources per worker
answer
Which of the following is a determinant of productivity?
question
ability to produce goods and services
answer
A basic principle of economics is that a country's standard of living depends on its
question
For a furniture company: wood, the skills and knowledge of its workers, saws.
answer
Which of the following lists contains, in this order, natural resources, human capital, and physical capital?
question
The level of productivity must increase.
answer
In order for the standard of living within a country to be enhanced over time, which of the following is essential?
question
- productivity is greater than Will's. - output is greater than Will's. - standard of living is higher than Will's
answer
Both Arnold and Will work 10 hours a day. Arnold can produce six baskets of goods per hour while Will can produce four baskets of the same goods per hour. It follows that Arnold's
question
True
answer
T/F: In the United States in 2010 real GDP per person was about $47,000, while in some poor countries real GDP per person was less than $5,000
question
international trade, but not to Japan's domestic quantities of natural resources.
answer
Japan's status as a rich nation is attributable to
question
Mary's productivity is higher than Sue's.
answer
Each day Sue works 8 hours and produces 7 units of goods and services. Mary works 10 hours each day and produces 10 units of goods and services. It follows that
