Question 1

If the consumer price index (CPI)was 120 at year-end 2008 and 126 at year-end 2009,inflation during 2009 was approximately

Accepted Answer

A) 4 percent. 
B) 5 percent. 
C) 6 percent. 
D) 7 percent. 
A) 4 percent. 
B) 5 percent. 
C) 6 percent. 
D) 7 percent.

Question 2

Andrew is offered a job in Little Rock,where the CPI is 80,and a job in New York,where the CPI is 125.Andrew's job offer in Little Rock is for $42,000.How much does the New York job have to pay in order for the two salaries to represent about the same purchasing power?

Accepted Answer

A) $74,667 
B) $65,625 
C) $60,900 
D) $52,500 
A) $74,667 
B) $65,625 
C) $60,900 
D) $52,500

Question 3

If the base year for the GDP deflator is 2000 and the value of the GDP deflator in 2003 was 107,this indicates that the general level of prices

Accepted Answer

A) declined between 2000 and 2003. 
B) was approximately 7 percent lower in 2003 than in 2000. 
C) was approximately 7 percent higher in 2003 than in 2000. 
D) was approximately 107 percent higher in 2003 than in 2000. 
A) declined between 2000 and 2003. 
B) was approximately 7 percent lower in 2003 than in 2000. 
C) was approximately 7 percent higher in 2003 than in 2000. 
D) was approximately 107 percent higher in 2003 than in 2000.

Question 4

Which of the following events will leave GDP unchanged?

Accepted Answer

A) You purchase 100 shares of Wal-Mart stock. 
B) You pay $500 to repair the damage done to your car by an uninsured motorist. 
C) You decide to work five more hours per week at your job to pay for the repairs performed on your car. 
D) You purchase a new car at an auction. 
A) You purchase 100 shares of Wal-Mart stock. 
B) You pay $500 to repair the damage done to your car by an uninsured motorist. 
C) You decide to work five more hours per week at your job to pay for the repairs performed on your car. 
D) You purchase a new car at an auction.

Question 5

How much would be added to this year's GDP if you sold your four-year-old automobile for $4,000 and purchased a two-year-old model from an acquaintance for $10,000.

Accepted Answer

A) nothing 
B) $6,000 
C) $10,000 
D) $14,000 
A) nothing 
B) $6,000 
C) $10,000 
D) $14,000

Question 6

Until recently,George lived in a home that was newly constructed in 2005.In 2005,he paid $200,000 for the brand new house.He sold the house in 2006 for $225,000.Which of the following statements is correct regarding the sale of the house?

Accepted Answer

A) The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B) The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C) The 2006 sale increased 2006 GDP by $225,000;furthermore,the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D) The 2006 sale affected neither 2005 GDP nor 2006 GDP. 
A) The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. 
B) The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. 
C) The 2006 sale increased 2006 GDP by $225,000;furthermore,the 2006 sale caused 2005 GDP to be revised upward by $25,000. 
D) The 2006 sale affected neither 2005 GDP nor 2006 GDP.

Question 7

U.S.GDP and U.S.GNP are related as follows:

Accepted Answer

A) GNP = GDP - Income earned by foreigners in the U.S.+ Income earned by U.S.citizens abroad. 
B) GNP = GDP + Income earned by foreigners in the U.S.- Income earned by U.S.citizens abroad. 
C) GNP = GDP + Value of exported goods - Value of imported goods. 
D) GNP = GDP - Value of exported goods + Value of imported goods. 
A) GNP = GDP - Income earned by foreigners in the U.S.+ Income earned by U.S.citizens abroad. 
B) GNP = GDP + Income earned by foreigners in the U.S.- Income earned by U.S.citizens abroad. 
C) GNP = GDP + Value of exported goods - Value of imported goods. 
D) GNP = GDP - Value of exported goods + Value of imported goods.

Question 8

Your brother graduated from college 10 years ago and started to work at a salary of $20,000.You expect to graduate this year and start to work for $35,000.If the consumer price index was 80 ten years ago and is 140 this year,who will have received the higher real starting salary?

Accepted Answer

A) You will have. 
B) Your brother did. 
C) You and your brother both will have started at the same real salary level. 
D) Not enough information is supplied to answer the question. 
A) You will have. 
B) Your brother did. 
C) You and your brother both will have started at the same real salary level. 
D) Not enough information is supplied to answer the question.

Question 9

Crime currently affects the measurement of GDP such that

Accepted Answer

A) expenditures on police protection and detention centers contribute to GDP. 
B) the loss to victims due to crime is subtracted from GDP. 
C) crime is completely ignored because it does not express the economic well-being indicated by GDP. 
D) expenditures on police protection and detention centers are subtracted from GDP. 
A) expenditures on police protection and detention centers contribute to GDP. 
B) the loss to victims due to crime is subtracted from GDP. 
C) crime is completely ignored because it does not express the economic well-being indicated by GDP. 
D) expenditures on police protection and detention centers are subtracted from GDP.

Question 10

As per capita GDP has risen over time in the United States and other countries,the

Accepted Answer

A) life expectancy has increased. 
B) rate of illiteracy has increased. 
C) rate of infant mortality has increased. 
D) amount of leisure time has declined. 
A) life expectancy has increased. 
B) rate of illiteracy has increased. 
C) rate of infant mortality has increased. 
D) amount of leisure time has declined.

Question 11

Use the table below to choose the correct answer.
Table 7-3
  
-Refer to Table 7-3.Gross domestic product equals

Accepted Answer

A) $1,100. 
B) $1,120. 
C) $1,190. 
D) $1,220. 
A) $1,100. 
B) $1,120. 
C) $1,190. 
D) $1,220.

Question 12

A Minnesota farmer buys a new tractor made in Iowa by a German company.As a result,

Accepted Answer

A) U.S.investment and GDP increase,but German GDP is unaffected. 
B) U.S.investment and German GDP increase,but U.S.GDP is unaffected. 
C) U.S.investment,U.S.GDP,and German GDP are unaffected,because tractors are intermediate goods. 
D) U.S.investment,U.S.GDP,and German GDP all increase. 
A) U.S.investment and GDP increase,but German GDP is unaffected. 
B) U.S.investment and German GDP increase,but U.S.GDP is unaffected. 
C) U.S.investment,U.S.GDP,and German GDP are unaffected,because tractors are intermediate goods. 
D) U.S.investment,U.S.GDP,and German GDP all increase.

Question 13

Real GDP equals nominal GDP multiplied by the

Accepted Answer

A) GDP deflator in the base year divided by the GDP deflator in the current year. 
B) GDP deflator in the base year divided by the consumer price index in the current year. 
C) GDP deflator in the current year divided by the GDP deflator in the base year. 
D) consumer price index in the base year. 
A) GDP deflator in the base year divided by the GDP deflator in the current year. 
B) GDP deflator in the base year divided by the consumer price index in the current year. 
C) GDP deflator in the current year divided by the GDP deflator in the base year. 
D) consumer price index in the base year.

Question 14

The dollar value of GDP increased approximately 4 percent during the year,but real GDP fell 2 percent.Which of the following best explains this data?

Accepted Answer

A) The real capacity of the economy increased more rapidly than money output. 
B) In the international sector,there was a balance of trade deficit of approximately 2 percent of GDP. 
C) The inflation rate was approximately 6 percent during the year. 
D) The general level of prices rose approximately 2 percent. 
A) The real capacity of the economy increased more rapidly than money output. 
B) In the international sector,there was a balance of trade deficit of approximately 2 percent of GDP. 
C) The inflation rate was approximately 6 percent during the year. 
D) The general level of prices rose approximately 2 percent.

Question 15

Suppose that the nominal value of GDP increased by approximately 2 percent during a given year,but real GDP decreased by 3 percent.Which of the following best explains these events?

Accepted Answer

A) The money supply decreased by approximately 5 percent. 
B) Prices fell by approximately 5 percent. 
C) Prices increased by approximately 5 percent. 
D) The real productive capacity of the economy increased by approximately 5 percent. 
A) The money supply decreased by approximately 5 percent. 
B) Prices fell by approximately 5 percent. 
C) Prices increased by approximately 5 percent. 
D) The real productive capacity of the economy increased by approximately 5 percent.

Question 16

Real GDP per person

Accepted Answer

A) minus real GDP per person from the previous period equals the growth rate of real GDP per person. 
B) provides more meaningful comparisons across time and countries than real GDP. 
C) provides a less useful measure of the standard of living than nominal GDP per person. 
D) All of the above are correct. 
A) minus real GDP per person from the previous period equals the growth rate of real GDP per person. 
B) provides more meaningful comparisons across time and countries than real GDP. 
C) provides a less useful measure of the standard of living than nominal GDP per person. 
D) All of the above are correct.

Question 17

Your grandfather tells you that he earned $.50 per hour at his job when he was a boy in 1929.
a.Given that the CPI was 17.1 in 1929 and 184.0 in 2003,how much would you have to make in 2003 to have the same real hourly wage?
b.You made $5.50 an hour working during 2003.Were you better off than your grandfather in terms of purchasing power? Explain.
c.Your grandfather also tells you that a soda cost $.05 in 1929,and you know a soda cost $.55 in 2003.You decide to use the price of a soda as the price index.How much would the 2003 "soda equivalent" of $.50 per hour in 1929 be?

Accepted Answer

a.$5.38
b.Yes,$5.50 had more p

Question 18

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 19

Gross private domestic investment includes business

Accepted Answer

A) purchases of capital goods,all new construction,and purchases of consumer durable goods. 
B) purchases of capital goods,all new construction,and inventory investment. 
C) purchases of capital goods,all new commercial construction,and inventory investment. 
D) purchases of capital goods,all new residential construction,and inventory investment. 
E) purchases of all types of durable goods,all new construction,and inventory investment. 
A) purchases of capital goods,all new construction,and purchases of consumer durable goods. 
B) purchases of capital goods,all new construction,and inventory investment. 
C) purchases of capital goods,all new commercial construction,and inventory investment. 
D) purchases of capital goods,all new residential construction,and inventory investment. 
E) purchases of all types of durable goods,all new construction,and inventory investment.

Question 20

Your grandfather tells you he earned $0.65 per hour at his job when he was a boy in 1929.Given that the CPI was 17.1 in 1929 and 215.3 in 2008,how much would you have had to make in 2008 to have the same real hourly wage as your grandfather?

Accepted Answer

A) $0.65 
B) $6.50 
C) $8.18 
D) $10.76 
A) $0.65 
B) $6.50 
C) $8.18 
D) $10.76

Exam 7: Ataking the Nations Economic Pulse

If the consumer price index (CPI)was 120 at year-end 2008 and 126 at year-end 2009,inflation during 2009 was approximately

Andrew is offered a job in Little Rock,where the CPI is 80,and a job in New York,where the CPI is 125.Andrew's job offer in Little Rock is for $42,000.How much does the New York job have to pay in order for the two salaries to represent about the same purchasing power?

If the base year for the GDP deflator is 2000 and the value of the GDP deflator in 2003 was 107,this indicates that the general level of prices

Which of the following events will leave GDP unchanged?

How much would be added to this year's GDP if you sold your four-year-old automobile for $4,000 and purchased a two-year-old model from an acquaintance for $10,000.

Until recently,George lived in a home that was newly constructed in 2005.In 2005,he paid $200,000 for the brand new house.He sold the house in 2006 for $225,000.Which of the following statements is correct regarding the sale of the house?

U.S.GDP and U.S.GNP are related as follows:

Your brother graduated from college 10 years ago and started to work at a salary of $20,000.You expect to graduate this year and start to work for $35,000.If the consumer price index was 80 ten years ago and is 140 this year,who will have received the higher real starting salary?

Crime currently affects the measurement of GDP such that

As per capita GDP has risen over time in the United States and other countries,the

Use the table below to choose the correct answer. Table 7-3 -Refer to Table 7-3.Gross domestic product equals

A Minnesota farmer buys a new tractor made in Iowa by a German company.As a result,

Real GDP equals nominal GDP multiplied by the

The dollar value of GDP increased approximately 4 percent during the year,but real GDP fell 2 percent.Which of the following best explains this data?

Suppose that the nominal value of GDP increased by approximately 2 percent during a given year,but real GDP decreased by 3 percent.Which of the following best explains these events?

Real GDP per person

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

Gross private domestic investment includes business

Your grandfather tells you he earned $0.65 per hour at his job when he was a boy in 1929.Given that the CPI was 17.1 in 1929 and 215.3 in 2008,how much would you have had to make in 2008 to have the same real hourly wage as your grandfather?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

Filters