ECON HW 6 & 7 – Flashcards

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being? a. the unemployment rate b. the inflation rate c. gross domestic product d. the trade deficit

For an economy as a whole, a. wages must equal profit. b. consumption must equal income. c. income must equal expenditure. d. consumption must equal saving.

Which of the following is a way to compute GDP? a. add up the wages paid to all workers b. add up the quantities of all final goods and services c. add up the market values of all final goods and services d. add up the difference between the market values of all final goods and services and then subtract the costs of producing those goods and services

The value of the housing services provided by the economy's owner-occupied houses is a. included in GDP, and the estimated rental values of the houses are used to place a value on these housing services. b. included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services. c. excluded from GDP since these services are not sold in any market. d. excluded from GDP since the value of these housing services cannot be estimated with any degree of precision.

Grapes are considered intermediate goods a. whether the purchaser uses them to make wine to sell or eats them. b. if the purchaser uses them to make wine to sell others but not if the purchaser eats them. c. if the purchaser eats them, but not if the purchaser uses to them to make wine to sell. d. None of the above is correct.

A U.S.-owned automobile factory uses $100,000 worth of parts purchased from foreign countries along with U.S. inputs to produce 30 cars worth $20,000 each. Twenty of these cars are sold and 10 are left in inventory. How much did these actions add to GDP? a. $300,000 b. $500,000 c. $600,000 d. $700,000

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included a. in both German GDP and U.S. GDP. b. in German GDP, but is not included in U.S. GDP. c. in U.S. GDP, but is not included in German GDP. d. in neither German GDP nor U.S. GDP.

The consumption component of GDP includes spending on a. durable goods and nondurable goods, but not spending on services. b. durable goods and services, but not spending on nondurable goods. c. nondurable goods and services, but not spending on durable goods. d. durable goods, nondurable goods, and services.

For the purpose of calculating GDP, investment is spending on a. stocks, bonds, and other financial assets. b. real estate and financial assets such as stocks and bonds. c. capital equipment, inventories, and structures, including household purchases of new housing. d. capital equipment, inventories, and structures, excluding household purchases of new housing.

Which of the following is included in government purchases? a. unemployment benefits a state pays b. Social Security payments the U.S. government makes c. the services of a U.S. government attorney valued at the cost of her salary d. All of the above are correct.

Net exports equal a. exports plus imports. b. imports minus exports. c. Y - (C + I + G). d. Y - (C - I - G).

Changes in nominal GDP reflect a. only changes in prices. b. only changes in the amounts being produced. c. both changes in prices and changes in the amounts being produced. d. neither changes in prices nor changes in the amounts being produced.

A country's real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country's inflation rate? a. 16.7%. b. 10.0%. c. 15.0%. d. -9.1%.

GDP does not reflect a. the value of leisure. b. the value of goods and services produced at home. c. the quality of the environment. d. All of the above are correct.

GDP is the market value of all final goods and services produced by a country's citizens in a given period of time. True False

New home construction is included in the consumption component of GDP. True False

Changes in the GDP deflator reflect only changes in the prices of goods and services. True False

Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person. True False

The consumer price index is used to a. monitor changes in the level of wholesale prices in the economy. b. monitor changes in the cost of living over time. c. monitor changes in the level of real GDP over time. d. monitor changes in the stock market.

The inflation rate you are likely to hear on the nightly news is calculated from a. the GDP deflator. b. the CPI. c. the Dow Jones Industrial Average. d. the unemployment rate.

To calculate the CPI, the Bureau of Labor Statistics uses a. the prices of all goods and services produced domestically. b. the prices of all final goods and services. c. the prices of all consumer goods. d. the prices of some consumer goods.

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base 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 a. 100 in 2012. b. 105 in 2013. c. 109.5 in 2014. d. All of the above are correct.

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years? a. 1.04 percent b. 4.41 percent c. 6.00 percent d. 42.00 percent

If the CPI was 125 this year and 120 last year, then a. the cost of the CPI basket of goods and services increased by 4.2 percent this year. b. the price level increased by 4.2 percent this year. c. the inflation rate for this year was 4.2 percent. d. All of the above are correct.

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 a. price-change neglect. b. unmeasured quality change. c. substitution bias. d. relative bias.

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as a. $2.67 purchases today. b. $37.50 purchases today. c. $39.00 purchases today. d. $104.00 purchases today.

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 a. $35,000.00. b. $46,666.67. c. $61,950.00 d. $105,000.00.

Indexation refers to a. a process of adjusting the nominal interest rate so that it is equal to the real interest rate. b. using a law or contract to automatically correct a dollar amount for the effects of inflation. c. using a price index to deflate dollar values. d. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator.

The nominal interest rate tells you a. how fast the number of dollars in your bank account rises over time. b. how fast the purchasing power of your bank account rises over time. c. the number of dollars in your bank account today. d. the purchasing power of your bank account today.

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is a. -5 percent. b. 1.67 percent. c. 5 percent. d. 11 percent.

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 What was the real interest rate during this period? a. 3 percent b. 2 percent c. 3.3 percent d. 12.8 percent

Which of the following is not correct? a. The U.S. economy has never experienced deflation. b. Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate. c. Since 1965, the U.S. economy has experienced rising consumer prices in most years. d. During deflation, the real interest rate exceeds the nominal interest rate.

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer True False

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages. True False

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls. True False

The real interest rate tells you how fast the purchasing power of your bank account rises over time. True False