Question 1

If this year the CPI is 110 and last year it was 100, then

Accepted Answer

A) the cost of the CPI basket of goods and services has increased this year by 110 percent. 
B) the price level as measured by the CPI has increased by 10 percent. 
C) the inflation rate for this year has increased by 10 percent over last year's inflation rate. 
D) All of the above are correct. 
A) the cost of the CPI basket of goods and services has increased this year by 110 percent. 
B) the price level as measured by the CPI has increased by 10 percent. 
C) the inflation rate for this year has increased by 10 percent over last year's inflation rate. 
D) All of the above are correct.

Question 2

Which of the following is true of the chained consumer price index?

Accepted Answer

A) It will generally result in a slightly lower figure for the measured annual rate of inflation than the regular consumer price index. 
B) It makes no allowance for shifts away from goods and services as they become more expensive. 
C) It considers only changes in the prices of household necessities such as food and clothing. 
D) It holds the quantities of the goods and services used to calculate the index constant over lengthy time periods. 
A) It will generally result in a slightly lower figure for the measured annual rate of inflation than the regular consumer price index. 
B) It makes no allowance for shifts away from goods and services as they become more expensive. 
C) It considers only changes in the prices of household necessities such as food and clothing. 
D) It holds the quantities of the goods and services used to calculate the index constant over lengthy time periods.

Question 3

Nominal gross domestic product for the United States was $7,661.6 billion in 1996 and $8,110.9 billion in 1997. The GDP deflator was 109.5 in 1996 and 111.6 in 1997.
a.What was the 1997 real GDP expressed in 1996 prices?
b.What were the 1996 and 1997 GDPs expressed in base-year prices?
c.What was the percent change in the nominal GDP between 1996 and 1997?
d.What was the percent change in real GDP between 1996 and 1997?
e.What was inflation between 1996 and 1997?

Accepted Answer

a.
$7,958.3 billion
b.
$6,996.

Question 4

Suppose that the consumer price index (CPI) was 160 in 2010 and 166 in 2011, inflation during 2011 was

Accepted Answer

A) zero; prices were stable. 
B) 3.8 percent. 
C) 6 percent. 
D) 66 percent. 
A) zero; prices were stable. 
B) 3.8 percent. 
C) 6 percent. 
D) 66 percent.

Question 5

The consumer price index is calculated using a fixed basket of goods. Will this always give an accurate representation of the changing cost of living to consumers? Why or why not?

Accepted Answer

The CPI tends to overstate inflation bec

Question 6

Which of the following activities is not counted in our calculations of GDP?

Accepted Answer

A) the purchase of a hammer for household repairs 
B) the labor services of a volunteer group building a home for a poor widow 
C) the purchase of new, domestically-produced tires for your old foreign car 
D) a haircut received and paid for at a beauty salon 
A) the purchase of a hammer for household repairs 
B) the labor services of a volunteer group building a home for a poor widow 
C) the purchase of new, domestically-produced tires for your old foreign car 
D) a haircut received and paid for at a beauty salon

Question 7

GDP during a period can be calculated by summing either

Accepted Answer

A) the purchases of domestically produced final goods and services or the cost incurred in the production of those goods. 
B) the amount received by business firms for consumer goods and services or the spending of business firms on investment goods and services. 
C) all household expenditures on final goods and services or all business purchases of factors of production. 
D) sales of goods and services to foreigners or the purchase of goods and services from foreigners 
A) the purchases of domestically produced final goods and services or the cost incurred in the production of those goods. 
B) the amount received by business firms for consumer goods and services or the spending of business firms on investment goods and services. 
C) all household expenditures on final goods and services or all business purchases of factors of production. 
D) sales of goods and services to foreigners or the purchase of goods and services from foreigners

Question 8

In contrast with nominal GDP, real GDP refers to nominal GDP

Accepted Answer

A) minus exports. 
B) minus personal income taxes. 
C) corrected for price changes. 
D) corrected for depreciation. 
A) minus exports. 
B) minus personal income taxes. 
C) corrected for price changes. 
D) corrected for depreciation.

Question 9

If the underground economy is sizable, then GDP will

Accepted Answer

A) understate the economy's performance. 
B) overstate the economy's performance. 
C) fluctuate unpredictably. 
D) accurately reflect this subterranean activity. 
A) understate the economy's performance. 
B) overstate the economy's performance. 
C) fluctuate unpredictably. 
D) accurately reflect this subterranean activity.

Question 10

If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan, in which country's GDP will the car be counted?

Accepted Answer

A) Japan's, because Honda is a Japanese company 
B) Japan's because that is where the car is purchased 
C) The GDP of the United States because that is where it was built 
D) Both Japan and the United States 
A) Japan's, because Honda is a Japanese company 
B) Japan's because that is where the car is purchased 
C) The GDP of the United States because that is where it was built 
D) Both Japan and the United States

Question 11

If inventory investment during a year was minus $6 billion, producers must have

Accepted Answer

A) produced only $6 billion of new capital assets during the year. 
B) sold $6 billion more goods and services during the year than they produced. 
C) added goods valued at $6 billion to their stock of unsold goods and raw materials. 
D) produced new capital assets that exceeded the depreciation allowance by $6 billion. 
A) produced only $6 billion of new capital assets during the year. 
B) sold $6 billion more goods and services during the year than they produced. 
C) added goods valued at $6 billion to their stock of unsold goods and raw materials. 
D) produced new capital assets that exceeded the depreciation allowance by $6 billion.

Question 12

If waitresses and taxi drivers do not report all of their income to the government, GDP will be understated. This is because the unreported income

Accepted Answer

A) involves the introduction of new goods. 
B) is part of the underground economy. 
C) is an example of nonmarket production. 
D) represents an increase in leisure time. 
A) involves the introduction of new goods. 
B) is part of the underground economy. 
C) is an example of nonmarket production. 
D) represents an increase in leisure time.

Question 13

When the consumer price index rises, the typical family

Accepted Answer

A) has to spend more dollars to maintain the same standard of living. 
B) can spend fewer dollars to maintain the same standard of living. 
C) finds that its standard of living is not affected. 
D) can offset the effects of rising prices by saving more. 
A) has to spend more dollars to maintain the same standard of living. 
B) can spend fewer dollars to maintain the same standard of living. 
C) finds that its standard of living is not affected. 
D) can offset the effects of rising prices by saving more.

Question 14

Real GDP equals nominal GDP

Accepted Answer

A) minus exports. 
B) corrected for changes in the price level. 
C) minus personal income taxes. 
D) minus retail sales taxes. 
A) minus exports. 
B) corrected for changes in the price level. 
C) minus personal income taxes. 
D) minus retail sales taxes.

Question 15

Which of the following would be included in this year's GDP?

Accepted Answer

A) the value of a used car, at its sale price 
B) the value of a new domestic automobile, at its sale price 
C) a sale of Microsoft stock from one individual to another 
D) the face value of a life insurance policy paid to a woman at the death of her husband 
A) the value of a used car, at its sale price 
B) the value of a new domestic automobile, at its sale price 
C) a sale of Microsoft stock from one individual to another 
D) the face value of a life insurance policy paid to a woman at the death of her husband

Question 16

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008. What was the country's inflation rate during 2008?

Accepted Answer

A) 5 percent 
B) 8 percent 
C) 60 percent 
D) 68 percent 
A) 5 percent 
B) 8 percent 
C) 60 percent 
D) 68 percent

Question 17

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as

Accepted Answer

A) $20.00 purchased in 1955. 
B) $33.33 purchased in 1955. 
C) $47.50 purchased in 1955. 
D) None of the above is correct. 
A) $20.00 purchased in 1955. 
B) $33.33 purchased in 1955. 
C) $47.50 purchased in 1955. 
D) None of the above is correct.

Question 18

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of wages, self-employment income, rents, interest, profits, indirect taxes, and depreciation. This method of deriving GDP is called the

Accepted Answer

A) opportunity cost approach. 
B) resource cost-income approach. 
C) expenditure approach. 
D) monetarist approach. 
A) opportunity cost approach. 
B) resource cost-income approach. 
C) expenditure approach. 
D) monetarist approach.

Question 19

The consumer price index is

Accepted Answer

A) a measure of the increase in the average price of all of the goods that are included in the calculation of GDP. 
B) a comparison of the cost of buying a typical bundle of goods during a given period with the cost of buying the same bundle during an earlier base period. 
C) the ratio of the average price of a typical market basket of goods compared to the cost of producing those goods during the previous year. 
D) a comparison of the cost of the typical bundle of goods consumed in period 1 with the cost of a different bundle of goods typically consumed in period 2. 
A) a measure of the increase in the average price of all of the goods that are included in the calculation of GDP. 
B) a comparison of the cost of buying a typical bundle of goods during a given period with the cost of buying the same bundle during an earlier base period. 
C) the ratio of the average price of a typical market basket of goods compared to the cost of producing those goods during the previous year. 
D) a comparison of the cost of the typical bundle of goods consumed in period 1 with the cost of a different bundle of goods typically consumed in period 2.

Question 20

Suppose, in dollar terms, nominal GDP increased approximately 4 percent during a given year, and real GDP decreased 1 percent. Which of the following best explains these events?

Accepted Answer

A) The money supply increased approximately 4 percent. 
B) Prices decreased approximately 3 percent. 
C) Prices increased approximately 4 percent. 
D) Prices increased approximately 5 percent. 
A) The money supply increased approximately 4 percent. 
B) Prices decreased approximately 3 percent. 
C) Prices increased approximately 4 percent. 
D) Prices increased approximately 5 percent.

If this year the CPI is 110 and last year it was 100, then

Which of the following is true of the chained consumer price index?

Suppose that the consumer price index (CPI) was 160 in 2010 and 166 in 2011, inflation during 2011 was

The consumer price index is calculated using a fixed basket of goods. Will this always give an accurate representation of the changing cost of living to consumers? Why or why not?

Which of the following activities is not counted in our calculations of GDP?

GDP during a period can be calculated by summing either

In contrast with nominal GDP, real GDP refers to nominal GDP

If the underground economy is sizable, then GDP will

If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan, in which country's GDP will the car be counted?

If inventory investment during a year was minus $6 billion, producers must have

If waitresses and taxi drivers do not report all of their income to the government, GDP will be understated. This is because the unreported income

When the consumer price index rises, the typical family

Real GDP equals nominal GDP

Which of the following would be included in this year's GDP?

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008. What was the country's inflation rate during 2008?

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of wages, self-employment income, rents, interest, profits, indirect taxes, and depreciation. This method of deriving GDP is called the

The consumer price index is

Suppose, in dollar terms, nominal GDP increased approximately 4 percent during a given year, and real GDP decreased 1 percent. Which of the following best explains these events?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 7: Taking the Nations Economic Pulse

If this year the CPI is 110 and last year it was 100, then

Which of the following is true of the chained consumer price index?

Suppose that the consumer price index (CPI) was 160 in 2010 and 166 in 2011, inflation during 2011 was

The consumer price index is calculated using a fixed basket of goods. Will this always give an accurate representation of the changing cost of living to consumers? Why or why not?

Which of the following activities is not counted in our calculations of GDP?

GDP during a period can be calculated by summing either

In contrast with nominal GDP, real GDP refers to nominal GDP

If the underground economy is sizable, then GDP will

If Honda (a Japan-based firm) produces a car in Ohio and exports it to Japan, in which country's GDP will the car be counted?

If inventory investment during a year was minus $6 billion, producers must have

If waitresses and taxi drivers do not report all of their income to the government, GDP will be understated. This is because the unreported income

When the consumer price index rises, the typical family

Real GDP equals nominal GDP

Which of the following would be included in this year's GDP?

Suppose that the consumer price index of a country was 160 at year-end 2007 and 168 at the end of 2008. What was the country's inflation rate during 2008?

Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as

The Department of Commerce sums the payments made to resources to arrive at GDP in the form of wages, self-employment income, rents, interest, profits, indirect taxes, and depreciation. This method of deriving GDP is called the

The consumer price index is

Suppose, in dollar terms, nominal GDP increased approximately 4 percent during a given year, and real GDP decreased 1 percent. Which of the following best explains these events?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters