Ngân hàng câu hỏi trắc nghiệm môn kinh tế vĩ mô ( Chất lượng cao )

Suppose that weather around the world is especially good next year, so farmers have unusually good crops. We might expect that this will shift. . Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops. The good weather would. Tài liệu giúp bạn tham khảo, ôn tập và đạt kết quả cao. Mời bạn đọc đón xem !

lOMoARcPSD| 46578282
CHAPTER 10
1.Macroeconomists study
a. decisions of households and firms.
b. economy-wide phenomena.
c. the interaction of households and firms.
d. regulations of firms and unions.
2. Which of the following headlines would be more closely related to what microeconomists study
than what macroeconomists study?
a. Unemployment rate rises from 5 percent to 5.5 percent.
b.Real GDP grows by 3.1 percent in the third quarter.
c. Retail sales at stores show large gains.
d. The price of oranges rises after an early frost.
3. Which of the following questions is more likely to be studied by a microeconomist than a
macroeconomist?
a. Why do prices in general rise by more in some countries than others?
b. Why do wages differ across industries?
Why do production and income increase in some periods and not in others?
d. Why has average income increased over time?
4. Macroeconomics includes the study of topics such as
a. national output, the inflation rate, and the trade deficit.
b. the price of Cisco stock, wage differences between genders, and antitrust laws.
c. differences in market structure, and how consumers maximize utility.
d. None of the above are correct.
5. The goal of macroeconomics is
a. to explain how economic changes affect prices of particular goods.
b. to devise policies to deal with market failures such as externalities and monopoly.
c. to explain changes that affect households and firms in general.
d. None or the above are correct.
6. The basic tools of supply and demand are
a. useful only in the analysis of economic behavior in individual markets.
b. useful in analyzing the overall economy, but not in analyzing individual markets.
c. not particularly usetul in eitner macroeconomic or microeconomic analysis
d. central to macroeconomic analysis as well as to microeconomic analysis.
7. Which of the following statistics is the best single measure of an economy's well-being?
a. the unemployment rate
b. the inflation rate
c. GDP
d. the trade deficit
8. Which of the following is correct for an economy?
a. Income is greater than production.
b. Production is greater than income.
c. Income always equals production.
d. Income equals production only when saving is zero.
lOMoARcPSD| 46578282
9. Robert works as a lawyer.
a. GDP computations should be made using his income from providing legal services, not his production
of legal services.
b. GDP computations should be made using his production, not his income from providing legal
services.
c. GDP computations should include both his income and his production.
d. GDP computations should include either his income or his production, but not both.
10. If GDP rises.
a. income and production must both rise.
b. income and production must both fall.
c. income must rise, but production may rise or fall.
d. production must rise, but income may rise or fall.
11. In a simple circular-flow diagram total income and total expenditure are
a. seldom equal because of the dynamic changes which occur in an economy.
b. equal only when all goods and services produced are sold.
c. always equal because every transaction has a buyer and seller.
d. always equal because of accounting rules
12. In a simple circular-flow diagram, total income and total expenditures in an economy are
a. equal because firms are ultimately owned by households.
b. equal only it there is no saving
c. equal because every transaction has a buyer and a seller.
d. never equal because some peoples income is not for production.
13. Firms use the money they get from a sale for
a. paying wages.
b. making a profit.
c. paying rents.
d. All of the above are correct.
14. The simple circular-flow diagram illustrates that
a. production generates income so that income and production are the same.
b. the economy's income exceeds its production.
c. the production of an economy exceeds its income.
d. None of the above are necessarily correct.
15. In an economy consisting of only households and firms, GDP can be computed by
a. adding up the total expenditures of households.
b. adding up the total income paid by firms.
c. Either a or b are correct.
d. None of the above are correct.
16. Production equals income because
a. by law firms must pay out all their revenue as income to someone.
b. for every sale there is a buyer and a seller.
c. because ultimately firms are owned by households.
d. None of the above are correct.
17. Which of the following is the correct definition of GDP?
a. the market value of all goods produced within a country
b. the market value of all final goods and services produced by the citizens of a country
lOMoARcPSD| 46578282
c. the market value of all final goods and services produced within a country
d. None of the above are correct.
18. To compute GDP we
a. simply sum the number of final goods and services.
b. sum the cost of producing final goods and services.
c. use weights determined by a survey regarding how much people value different sorts of goods and
services to compute GDP as a weighted average.
d. sum the market values of final goods and services.
19. In order to include many different products in an aggregate measure, GDP is computed using
a. values of goods based on surveys of consumers.
b. primarily market prices.
c. primarily costs of production.
d. weights that are computed by how much of a particular good is produced relative to total output
.
20. GDP is computed using market prices as the value of final goods and services because
a. market prices don’t change much, so it is easy to make comparisons between years.
b. if market prices are out of line with how people value goods, the government sets ceilings and floors on
them.
c. market prices reflect the value of goods and services.
d. None of the above are correct; the government does not use market prices to compute GDP
21. Which of the following is not included in GDP?
a. unpaid cleaning and maintenance of houses
b. services such as those provided by lawyers and hair stylists
c. the estimated rental value of owner-occupied housing
d. production of foreign citizens living in the United States
22. The value of housing service provided by the economy’s stock of houses is
a. not included in GDP since it is not sold on the market.
b. counted and is valued as the mortgage payment made on the house.
c. counted and uses only the purchase price of the house in the year it is sold.
d. counted and is based on an estimate of its rental value.
23. Suppose that an apartment complex converts to a condominium where the renters are now owners
of their former apartments.
a. The rent was included in GDP; the purchases of the condominiums are not.
b. The rent was included in GDP, and so is the purchase of the condominiums.
c. The rent was not included in GDP; the purchases of the condominiums are.
d. Neither the rent of the apartments nor the purchases of the condominium are included in GDP
.
24. Suppose that an apartment complex converts to a condominium where the renters are now
owners of their former apartments. Suppose that an estimate of the value of the condominium
owners’ housing services is now the same as their former rent. a. GDP necessarily increases.
b. GDP necessarily decreases.
c. GDP is unaffected because neither the rent nor the estimate of the value of housing services is included
in GDP.
d. GDP is unaffected because previously rent was included in GDP, and now it is replaced by
theestimate of the value of housing services.
25. Which of the following non-market goods or services is included as an estimate in U.S. GDP?
a. the value of unpaid housework
lOMoARcPSD| 46578282
b. the value of vegetables that people grow in their gardens
c. the estimated rental value of owner-occupied homes
d. None of the above are correct.
26. Over the last few decades Americans have chosen to cook less at home and eat more
at restaurants. This change in behavior, by itself, a. increased measured GDP.
b. reduced measured GDP.
c. did not affect measured GDP.
d. affected measured GDP only to the extent that people eat more at restaurants than at home
27. Over time people have come to rely more on market-produced goods and less on goods that
they produce for themselves. For example people eat at restaurants relatively more and prepare their
own meals at home relatively less. By itself this change would a. make GDP fall over time.
b. not make any change in GDP over time.
c. make GDP rise over time.
d. change GDP, but in an uncertain direction.
28. Ralph pays someone to mow his lawn. Norton mows his own lawn.
a. Only what Ralph pays to have his lawn mowed is included in GDP.
b. What Ralph pays to have his lawn mowed and the estimated value to Norton of mowing his own lawn
are both included in GDP.
c. Neither what Ralph pays nor the estimated value of Norton’s mowing is included in GDP.
d. The answer depends on what Norton reports to survey takers.
29. Jim is a chef at a restaurant. Sally prepared her own meals during the first quarter of 2002,
and then ate at Jim’s restaurant every day in the second quarter of 2002. Sally’s change of habit a.
necessarily raises GDP.
b. necessarily reduces GDP.
c. raises GDP only if the restaurant meals are more expensive than the estimated value of Sally’s meals.
d. has no impact on GDP.
30. If Susan decides to change the oil in her car herself instead of having Speedy Lube change the oil
for her GDP
a. necessarily rises.
b. necessarily falls.
c. will be unaffected because the same service is produced in either case.
d. will be unaffected because car maintenance is not included in GDP.
31. A professional gambler moves from a state where gambling is illegal to a state where gambling is legal.
This move
a. necessarily raises GDP.
b. necessarily decreases GDP.
c. doesn’t change GDP because gambling is never included in GDP.
d. doesn’t change GDP because in either case his income is included.
32. A professional gambler moves from a state where gambling is legal to a state where gambling is illegal.
This move
a. necessarily raises GDP.
b. necessarily decreases GDP.
c. doesn’t change GDP because gambling is never included in GDP.
d. doesn’t change GDP because in either case his income is included.
33. If a state made an illegal activity such as gambling or prostitution legal, then other things the same
GDP
lOMoARcPSD| 46578282
a. necessarily increases.
b. necessarily decreases.
c. doesn’t change because both legal and illegal production are included in GDP.
d. doesn’t change because these activities are never included in GDP.
34. If a state legalized gambling and then reversed its decision and made gambling illegal, then other
things the same GDP
a. necessarily increases.
b. necessarily decreases.
c. doesn’t change because both legal and illegal production are included in GDP.
d. doesn’t change because gambling is never included in GDP.
35. Roommates Grace and Kelly are sharing household chores and think they have an even
exchange. Other things the same, if instead they paid each other for the chores the other did GDP
would
a. rise.
b. fall
c. be unaffected because paid or not, household chores are not included in GDP.
d. be unaffected because paid or not, household chores are included in GDP.
36. Which of the following is correct?
a. The value of all intermediate goods and final goods are included in GDP.
b. The value of intermediate goods are included in GDP only if they were produced in the previous year.
c. The value of intermediate goods are included in GDP only if they are purchased by firms rather than
households.
d. The value of intermediate goods are not included in GDP.
37. GDP
a. includes the value of intermediate goods so we can get a measure of sales
b. excludes the value of intermediate goods because they are too difficult to measure.
c. excludes the value of intermediate goods because their value is already counted in the value offinal
goods.
d. None of the above are correct.
38. The total sales of all firms in the economy for a year
a. equals GDP for the year.
b. is larger than GDP for the year.
c. is smaller than GDP for the year.
d. equals GNP for the year.
39. Grapes are
a. always counted as an intermediate good.
b. counted as an intermediate good only if they are used to produce another good like wine.
c. counted as an intermediate good only if they are consumed.
d. counted as an intermediate good whether they are used to produce another good or consumed.
40. Flour is
a. always counted as an intermediate good.
b. counted as an intermediate good if it is used by a company to make bread.
c. counted as a final good if it is used by a consumer who bakes bread for his own consumption.d. Both b
and c are correct.
lOMoARcPSD| 46578282
41. Gasoline is
a. always considered an intermediate good.
b. counted as a final good if a company uses it to provide transportation services.
c. counted as a final good if a consumer uses it to run a lawnmower to mow her yard. d. Both b and c
are correct.
42. Goods that go into inventory and are not sold during the current period are
a. counted as intermediate goods and so are not included in current period GDP.
b. counted in current GDP only if the firm that produced them sells them to another firm.
c. included in current period GDP as inventory investment.
d. included in current period GDP as consumption.
43. The local Chevrolet dealership has an increase in inventory of 25 cars in 2003. In 2004 it sells all
25 cars.
a. The value of increased inventory will be counted as part of GDP in 2003, but the value of the cars
sold in 2004 will not cause GDP to increase.
b. The value of the increased inventory will not affect 2003 GDP, but will be included in 2004 GDP.
c. The value of the increased inventory will be counted as 2003 GDP and the value of the cars sold in 2004
will increase 2004 GDP.
d. None of the above are correct.
44. A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them
before the end of the second quarter, and holds the others in its warehouse.
a. Since the DVDs will eventually be bought by consumers, they are included as consumption in the
second quarter.
b. Since the DVDs were not purchased this quarter, they will be counted as an increase in third-quarter
GDP.
c. The DVDs will be counted as a change in inventory in the second quarter and so will be
included in secondquarter GDP.
d. The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third
quarter will raise GDP.
45. George buys and lives in a newly constructed home he paid $200,000 for in 2003. He sells the
house in 2004 for $225,0000.
a. The 2004 sale increases 2004 GDP by $225,000 and does nothing to 2003 GDP.
b. The 2004 sale increases 2004 GDP by $25,000 and does nothing to 2003 GDP.
c. The 2004 sale does not increase 2004 GDP and does nothing to 2003 GDP.
d. The 2004 sale increases 2004 GDP by $225,000 and 2003 GDP is revised upward by $25,000.
46. Darla, a Canadian citizen, only works in the United States. The value added to production from
her employment is
a. included in both U.S. GDP and U.S. GNP.
b. included only in U.S. GDP.
c. included only in U.S. GNP.
d. not included in either U.S. GDP or U.S. GNP.
47. Greg, a U.S. citizen, works only in Canada. The value added to production from his employment
is
a. included in both U.S. GDP and U.S. GNP.
b. included only in U.S. GDP.
c. included only in U.S. GNP.
d. not included in either U.S. GDP or U.S. GNP.
48. Anna, a U.S. citizen, works only in Germany. The value added to production from
her employment is included a. only in U.S. GDP.
lOMoARcPSD| 46578282
b. only in German GDP.
c. in both German and U.S. GDP.
d. in neither German nor U.S. GDP.
49. An Italian company opens a pasta company in the U.S. The profits from this pasta company are
included in
a. both U.S. and Italian GNP.
b. both U.S. and Italian GDP.
c. U.S. GDP and Italian GNP.
d. U.S. GNP and Italian GDP.
50. An American company owns a fast food restaurant in Romania. The value of goods and services it
produces is included
a. in both Romanian and U.S. GDP.
b. partly in Romanian GDP and partly in U.S. GDP.
c. in Romanian GDP, but not U.S. GDP.
d. in U.S. GDP, but not Romanian GDP.
51. Which of the following is included in GDP?
a. the sale of stocks and bonds
b. the sale of used goods
c. the sale of services such as visits to a doctor
d. All of the above are correct
52. Which of the following is included in GDP?
a. the sale of stocks and bonds
b. the estimated rental value of owner occupied housing
c. unpaid production of goods and services at home
d. All of the above are correct.
53. Which of the following is included in U.S. GDP?
a. goods produced by foreign citizens working in the United States
b. the difference in the price of the sale of an existing home and its original purchase pricec. known
illegal activities
d. None of the above are correct.
54. Which of the following is counted in U.S. GDP?
a. final goods and services purchased by the government
b. both the peaches used by a bakery to make peach pies and the peach pies
c. goods and services produced by U.S. citizens working in foreign countries
d. None of the above are correct.
55. Which of the following is counted in GDP?
a. the estimated value of housework
b. the value of illegally produced goods and services
c. the value of newly issued stocks and bonds
d. None of the above are correct.
56. U.S. GNP is calculated from U.S. GDP by
a. including income earned by foreigners in the United States and excluding income earned by U.S.
citizens abroad.
lOMoARcPSD| 46578282
b. including income earned by U.S. citizens abroad and excluding income earned by foreigners in the
U.S.
c. including income earned by foreigners in the United States.
d. excluding income earned by U.S. citizens abroad.
75. In computing GDP, investment is spending on
a. stocks, bonds, and other financial assets.
b. real estate and financial assets.
c. new capital equipment, inventories, and structures, including new housing.
d. capital equipment, inventories, and structures, excluding household purchases of new housing.
76. Government purchases include spending on goods and services by
a. the federal government only.
b. state and federal governments only.
c. local, state and federal governments.
d. local and state governments, but not the federal government.
77. If you buy a burger and fries at your favorite fast food restaurant
a. neither GDP nor consumption spending will be affected because you would have eaten at home if you
hadn't eaten at the restaurant.
b. GDP will be higher, but consumption spending will be unchanged.
c. GDP will be unchanged, but consumption spending will be higher.
d. both GDP and consumption spending will be higher.
78. Consider two things that might be included in GDP: A. The estimated rental value of
owneroccupied housing, and B. Purchases of newly constructed homes. a. Both A and B are
included as consumption.
b. A is included as consumption, while B is included as investment.
c. B is included as consumption, while A is included as investment.
d. Only B is included in GDP and it is included as investment.
79. When a firm produces consumer goods and adds some to inventory rather than selling it. It is
a. not counted in the current quarter GDP.
b. counted in the current quarter GDP as investment.
c. counted in the current quarter GDP as consumption.
d. counted in the current quarter GDP as a statistical discrepancy
80. A firm produces consumer goods and adds some to inventory in the third quarter. In the fourth
quarter the firm sells the goods at a retail outlet which leaves their inventory diminished. As a
result of these actions, what component(s) of real GDP change in the fourth quarter? a. only
investment and it decreases
b. only consumption and it increases
c. Investment decreases and consumption increases.
d. None of the above is correct.
81. A U.S. publisher purchases new computers. This purchase by itself makes
a. investment and GDP higher.
b. investment higher and leaves GDP unchanged.
c. investment higher and reduces GDP.
d. neither investment nor GDP higher.
82. A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result
lOMoARcPSD| 46578282
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.
83. If a U.S. citizen buys a television made in Korea by a Korean firm,
a. U.S. net exports decrease, and U.S. GDP decreases.
b. U.S. net exports are unaffected, and U.S. GDP decreases.
c. U.S. net exports are unaffected, and U.S. GDP is unaffected.
d. U.S. net exports decrease but U.S. GDP is unaffected.
84. If a U.S. household buys a $75 handbag from Italy, U.S. consumption increases by $75, U.S.
a. imports increase by $75, and U.S. GDP increases by $75.
b. imports increase by $75, but U.S. GDP is unaffected.
c. imports are unaffected, and U.S. GDP is unaffected.
d. exports increase by $75, and U.S. GDP increases by $75.
85. Steph buys a designer dress produced by an American-owned fashion shop in France. As a result,
U.S. consumption increases, U.S. net exports
a. decrease, U.S. GDP is unaffected, but U.S. GNP increases.
b. decrease, U.S. GDP increases, but U.S. GNP is unaffected.
c. decrease, U.S. GNP increases, but French GDP is unaffected.
d. are unaffected, U.S. GDP is unaffected, but French GDP increases
86. A German citizen buys an automobile produced in the United States by a Japanese company. As a
result,
a. U.S. net exports increase, U.S. GNP and GDP are unaffected, Japanese GNP increases, German net
exports decrease, and German GNP and GDP are unaffected.
b. U.S. net exports, GNP, and GDP increase, Japanese GDP increases, German net exports decrease, and
German GDP is unaffected.
c. U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and
German GDP and GNP are unaffected.
d. U.S. net exports, GNP, and GDP are unaffected, Japanese GNP increases, German net exports
decrease, and German GDP and GNP fall.
87. After the terrorist attack on September 11, governments raised expenditures to increase security at
airports. These purchases of goods and services are
a. not included in GDP since they are not productive.
b. not included in GDP since the government will have to raise taxes to pay for them.
c. included in GDP since government expenditures are included in GDP.
d. included in GDP only to the extent that the Federal, and not state or local governments, paid for
them.
88. The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result,
a. U.S. government purchases increase by $30,000 and U.S. net exports decrease by $30,000. U.S.
GDP and GNP are unaffected.
b. U.S. government purchases increase by $30,000 and U.S. GNP increases by $30,000. U.S. GDP and
net exports are unaffected.
c. U.S. government purchases, net exports, GDP, and GNP are unaffected.
d. U.S. government purchases increase by $30,000 and U.S. net exports decrease by $30,000. U.S.
GNP increases by $30,000, but U.S. GDP is unaffected.
lOMoARcPSD| 46578282
89. A wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in
Connecticut that uses local workers.
a. U.S. investment, GDP, and GNP all increase by the same amount.
b. U.S. investment increases, but GDP and GNP are unaffected by the purchase.
c. U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller
amount.
d. U.S. investment and GNP increase by the same amount, but U.S. GDP increases by a smaller amount.
90. A transfer payment is
a. a payment for moving expenses a worker receives when he or she is transferred by an employer to anew
location.
b. a payment that is automatically transferred from your bank account to pay your utility bill.
c. the term that is used to indicate that your paycheck has been automatically deposited to your bank
account
d. a form of government spending that is not made in exchange for a currently produced good or
service
Chapter 11: Measuring the Cost of Living
MULTIPLE CHOICE
1. Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball
players can earn 200 times as much as Babe Ruth in 1931. However, prices have also risen
since 1931. We can conclude that
a. the best baseball players today are about 200 times better off than Babe Ruth was in 1931.
b. because prices have also risen, the standard of living of baseball stars hasn’t changed since
1931.
c. one cannot make judgments about changes in the standard of living based on changes in
prices and changes in incomes.
d. one cannot determine whether baseball stars today enjoy a higher standard of living
than Babe Ruth did in 1931 without additional information regarding increases in
prices since 1931.
2. When the consumer price index rises, the typical family
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.
3. The consumer price index is used to
a. track changes in the level of wholesale prices in the economy.
b. monitor changes in the cost of living.
c. monitor changes in the level of real GDP.
d. track changes in the stock market.
4. The term “inflation” is used to describe a situation in which a. the
overall level of prices in the economy is increasing.
b. incomes in the economy are increasing.
c. stock-market prices are rising.
d. the economy is growing rapidly.
lOMoARcPSD| 46578282
5. When the overall level of prices in the economy is increasing, we
say that the economy is experiencing
a. economic growth.
b. inflation.
c. unemployment.
d. deflation.
6. The inflation rate is defined as the
a. price level.
b. change in the price level.
c. price level divided by the price level in the previous period.
d. percentage change in the price level from the previous period.
7. The CPI is a measure of the overall cost of
a. inputs purchased by a typical producer.
b. goods and services bought by a typical consumer.
c. goods and services produced in the economy.
d. stocks on the New York Stock Exchange.
8. Which of the following agencies calculates the CPI?
a. the National Price Board
b. the Department Of Weight and Measurements
1
c. the Bureau of Labor Statistics
d. the Congressional Budget Office
9. The CPI is calculated
a. weekly.
b. monthly.
c. quarterly.
d. yearly.
10. What is the basket of goods used to construct the CPI?
a. a random sample of all goods and services produced in the economy
b. the goods and services typically bought by consumers, according to Bureau of Labor
Statistics surveys
c. goods and services weighted by the ratio of expenditures on them relative to the consumption
component of GDP
d. the least and the most expensive goods and services in each major category of consumer
expenditures
11. Which goods are supposed to be included in the CPI?
a. all goods and services produced in the economy
b. all goods and services that typical consumers buy
c. all goods and services in the consumption component of the GDP accounts
d. all the goods, but not the services, in the consumption component of the GDP accounts
12. In the CPI, goods and services are weighted according to
a. how much consumers buy of each item.
b. whether the goods and services are necessities or luxuries.
c. the levels of production of the goods and services in the domestic economy.
d. by the expenditures on them in the GDP national income accounts.
lOMoARcPSD| 46578282
13. How are the weights on the various goods and services in the CPI basket determined?
a. All goods and services are weighted equally.
b. A survey is conducted to determine how much of each good and service typical consumers
purchase.
c. the weights equal the ratio of expenditures on each good or service divided by thetotal
consumption expenditures in the GDP accounts.
d. Each good and service is weighted according to its price.
14. The steps involved in calculating the consumer price index include, in order:
a. choose a base year, fix the basket, compute the inflation rate, compute the basket’s cost, and
compute the index.
b. choose a base year, find the prices, fix the basket, compute the basket’s cost, and compute the
index.
c. fix the basket, find the prices, compute the basket’s cost, choose a base year and compute the
index.
d. fix the basket, find the prices, compute the inflation rate, choose a base year and
compute the index. \
Use the table below to answer the following two questions.
year peaches pecans
2000 $11 per bushel $6 per bushel
2001 $9 per bushel $10 per bushel
15. Suppose that the typical consumer basket consists of 10 bushels of peaches and 15 bushels of pecans
and that the base year is 2000. What is the consumer price index for 2001? a. 100
b. 120
c. 200
d. 240
16. What was the inflation rate in 2001?
a. 20 percent
b. 16.7 percent
c. 10 percent
d. 8 percent
Use the table below to answer the following two questions.
17. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn. What is the
consumer price index for 2004 if the base year is 2003? a. 100
b. 105
c. 115
d. 120
18. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn. What is the
inflation rate for 2004? a. 33.3 percent
b. 25 percent
c. 20 percent
d. 15 percent
year
price of
pork
price of corn
2003
$20
$20
2004
$20
$30
lOMoARcPSD| 46578282
19. The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts
and 2 pants. In 2001 bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each and
pants cost $10.00 per pair.
In 2002 bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each and pants cost
$12.00 per pair. What was the inflation rate, as measured by the CPI, for Aquilonia between 2001
and
2002? 56/45
a. 30 percent
b. 24.4 percent
c. 21.6 percent
d. It is impossible to determine without knowing the base year.
Use the following information to answer the next four questions.
In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of
bread, 3 robes and 2 gallons of gasoline. The per-unit prices of these goods have been as follows:
Year Apples Bread Robes Gasoline
199 $1.00 $2.00 $10.00 $1.00
9
200 $1.00 $1.50 $9.00 $1.50
0
200 $2.00 $2.00 $11.00 $2.00
1
200 $3.00 $3.00 $15.00 $2.50
2
20. What was the inflation rate, as measured by the CPI, between 1999 and 2000? a. –8.89 percent
b. –7.14 percent
c. 3.75 percent
lOMoARcPSD| 46578282
d. It is impossible to determine without knowing the base year.
21. What was the inflation rate, as measured by the CPI, between 2000 and 2001? a. 28.5 percent
b. 34.2 percent
c. 47 percent
d. It is impossible to determine without knowing the base year.
What was the inflation rate, as measured by the CPI, between 2001 and 2002?
e. 40 percent
f. 40.25 percent
g. 46.46 percent
h. It is impossible to determine without knowing the base year.
22. For the CPI, the base year is
a. the benchmark against which other years are compared, and it changes each year.
b. the benchmark against which other years are compared, and it changes occasionally.c. the
year the CPI first appeared.
d. always 1989.
23. For any given year, the CPI is the price of the basket of goods and services in the
a. given year divided by the price of the basket in the base year, then multiplied by 100.
b. given year divided by the price of the basket in the previous year, then multiplied by 100.
c. base year divided by the price of the basket in the given year, then multiplied by 100.
d. previous year divided by the price of the basket in the given year, then multiplied by 100.
24. The inflation rate is calculated
a. from a survey of consumer spending.
b. by adding up the price increases of all goods and services.
c. by computing a simple average of the price increase in all goods and services.
d. by determining the percentage increase in the price index from the preceding period.
25. If this year the CPI is 125 and last year it was 120, then we know that
a. all goods have become more expensive.
b. the price level has increased.
c. the inflation rate has increased.
d. All of the above are correct.
26. If the consumer price index was 100 in the base year and 107 the following year, the inflation rate was
a. 107 percent.
b. 10.7 percent.
c. 7 percent.
d. None of the above are correct.
27. If the price index in the first year was 90, in the second year was 100, and in the third year was
95, the economy experienced
a. 10 percent inflation between the first and second years and 5 percent inflation between the
second and third years.
b. 10 percent inflation between the first and second years and 5 percent deflation between the
second and third years.
c. 11 percent inflation between the first and second years and 5 percent inflation between the
second and third years.
d. 11 percent inflation between the first and second years and 5 percent deflation between the
second and third years.
28. The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the
deflation rate between the first and second year, and between the second and third year?
a. 11 percent between the first and second year, 11 percent between the second and third year
lOMoARcPSD| 46578282
b. 11 percent between the first and second year, 12 percent between the second and third year
c. 10 percent between the first and second year, 11 percent between the second and third year
d. 10 percent between the first and second year, 12 percent between the second and third year
29. The price index in the first year is 125, in the second year is 150, and in the third year is 200. What is
the inflation rate between the first and second year and between the second and third year?
a. 20 percent between the first and second year, 33 percent between the second and third year
b. 25 percent between the first and second year, 75 percent between the second and third year
c. 25 percent between the first and second year, 50 percent between the second and third year
d. 50 percent between the first and second year, 100 percent between the second and third year
30. Which change in the price index shows the greatest rate of inflation: 100 to 110, 150 to 165, or 180 to
198?
31. a. 100 to 110
b. 150 to 165
c. 180 to 198
d. All changes show the same rate of inflation.
32. Which change in the price index shows the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to
170? a. 80 to 100 b. 100 to 120
c. 150 to 170
d. All changes show the same rate of inflation.
33. From October 2001 to October 2002 the CPI in Canada rose from 116.5 to 119.8. In Mexico it rose
from 97.2 to 102.3
What were the inflation rates for Canada and Mexico?
a. 3.3 percent and 6.7 percent
b. 3.3 percent and 5.1 percent
c. 2.8 percent and 6.7 percent
d. 2.8 percent and 5.2 percent
34. The price index in 2001 is 120, and in 2002 the price index is 127.2. What is the inflation rate? a. 5
percent
b. 6 percent
c. 8 percent
d. The inflation rate is impossible to determine without knowing the base year.
35. The price index is 320 in one year and 360 in the next. What was the inflation rate? a. 6.7 percent
b. 8 percent
c. 11.1 percent
d. 12.5 percent
36. The price index is 270 in one year and 300 in the next. What was the inflation rate? a. 9.3 percent
b. 10 percent
c. 11.1 percent
d. None of the above are correct.
37. The price index is 180 in one year and 210 in the next. What was the inflation rate? a. 16.7 percent
b. 14.3 percent
c. 11.1 percent
d. None of the above are correct.
38. An inflation rate calculated using the CPI shows the rate of change of a. all prices.
b. the prices of all final goods and services.
c. the prices of all consumer goods.
lOMoARcPSD| 46578282
d. the prices of some consumer goods.
39. From 2000 to 2001 the CPI for medical care rose from 260.8 to 272.8. What was the inflation rate for
medical care?
a. 12 percent
b. 11.1 percent
c. 4.9 percent
d. 4.6 percent
50. The producer price index measures the cost of a basket of goods and services
a. typical of those produced in the economy.
b. produced for a typical consumer.
c. sold by producers.
d. bought by firms.
51. Changes in the producer price index are often thought to be useful in predicting changes in a. the stock
price index.
b. the consumer price index.
c. consumer confidence.
d. the rate of output of goods and services.
52. Suppose than in 2002, the producer price index increases by 2 percent. As a result, economists most likely
will predict that
a. GDP will increase in the next year.
b. next year the producer price index will fall.
c. the exchange rate will increase in the future.
d. the consumer price index will increase in the future.
53. The goal of the consumer price index is to measure changes in the
a. costs of production
b. cost of living.
c. relative prices of consumer goods.
d. production of consumer goods.
54. The consumer price index is
a. not very useful as a measure of the cost of living.
b. a perfect measure of the cost of living.
c. not used as a measure of the cost of living.
d. not a perfect measure of the cost of living.
55. Which of the following is not a widely acknowledged problem with the CPI as a measure of the cost of
living?
a. substitution bias
b. introduction of new goods
c. unmeasured quality change
d. unmeasured price change
56. The substitution bias in the consumer price index refers to the
a. substitution of new goods for old goods in the purchases of consumers.
b. substitution of quality for quantity in consumer purchases over time.
c. fact that consumers substitute toward goods that have become relatively less expensive.
d. substitution of new prices for old prices in the basket of goods from one year to the next.
57. When the relative price of a good increases, consumers will respond by buying
a. more of it and its substitutes.
b. less of it and its substitutes.
lOMoARcPSD| 46578282
c. less of it and more of its substitutes.
d. more of it and less of its substitutes.
58. Suppose the price of a quart (một lít) of milk rises from $1 to $1.25 and the price of a T-shirt rises from $8
to $10. If the CPI rises from 150 to 175 people will likely buy a. more milk and more T-shirts.
b. more milk and fewer T-shirts.
c. less milk and more T-shirts.
d. less milk and fewer T-shirts.
59. Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of coffee rises from $2 to
$2.50 . If the CPI rises from 150 to 200 people will likely buy a. more ice cream and more coffee.
b. more ice cream and less coffee.
c. less ice cream and more coffee.
d. less ice cream and less coffee.
60. By not taking into account the possibility of consumer substitution, the CPI
a. understates the cost of living.
b. overstates the cost of living.
c. may overstate or understate the cost of living depending on how much prices rise.
d. doesn’t accurately reflect the cost of living, but it is unclear if it overstates or understates the cost
of living.
61. Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the
economy causes the CPI to overestimate the cost of living. This is so because
a. new goods and services are always of higher quality than existing goods and services.
b. new goods and services cost less than existing goods and services.
c. new goods and services cost more than existing goods and services.
d. when a new good is introduced, it gives consumers greater choice, thus reducing the
amountthey must spend to maintain their standard of living.
62. When the quality of a good improves the purchasing power of the dollar
a. increases, so the CPI overstates the change in the cost of living if the quality change is not
accounted for.
b. increases, so the CPI understates the change in the cost of living if the quality change is not
accounted for.
c. decreases, so the CPI overstates the change in the cost of living if the quality change is not
accounted for.
d. decreases, so the CPI understates the change in the cost of living if the quality change is not
accounted for.
63. When the quality of a good deteriorates (xuống cấp) the purchasing power of the dollar
a. increases, so the CPI overstates the change in the cost of living if the quality change is not
accounted for.
b. increases, so the CPI understates the change in the cost of living if the quality change is not
accounted for.
c. decreases, so the CPI overstates the change in the cost of living if the quality change is not
accounted for.
d. decreases, so the CPI understates the change in the cost of living if the quality change is not
accounted for.
71. Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the
soft drink section, she notices that the price of ginger ale has been increased 15 percent, so she
decides to buy some peppermint tea instead. Which problem in the construction of the CPI is
this situation most relevant to? a. substitution bias
b. introduction of new goods
c. unmeasured quality change
lOMoARcPSD| 46578282
d. income effect
78. The GDP deflator reflects the
a. level of prices in the base year relative to the current level of prices.
b. current level of prices relative to the level of prices in the base year.
c. level of real output in the base year relative to the current level of real output.
d. current level of real output relative to the level of real output in the base year.
79. An important difference between the GDP deflator and the consumer price index is that
a. the GDP deflator reflects the prices of goods and services bought by producers, whereas the
consumer price index reflects the prices of goods and services bought by consumers.
b. the GDP deflator reflects the prices of all final goods and services produced domestically,
whereas the consumer price index reflects the prices of some goods and services bought by
consumers.
c. the GDP deflator reflects the prices of all final goods and services produced by a nation's
citizens, whereas the consumer price index reflects the prices of final goods and services
bought by consumers.
d. the GDP deflator reflects the prices of all goods and services bought by producers and consumers,
whereas the consumer price index reflects the prices of final goods and services bought by
consumers.
80. If the prices of Australian-made shoes imported into the United States increase,
a. both the GDP deflator and the consumer price index will increase.
b. neither the GDP deflator nor the consumer price index will increase.
c. the GDP deflator will increase but the consumer price index will not increase.
d. the consumer price index will increase, but the GDP deflator will not increase.
81. An increase in the price of domestically produced industrial robots will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
82. By itself a reduction in the price of large tractors imported into the United States from Russia will
a. make the GDP deflator decrease and the consumer price index to increase.
b. make the GDP deflator increase, but the consumer price index is unchanged.
c. will increase both the GDP deflator and the consumer price index.
d. will not change either the GDP deflator or the consumer price index.
83. An increase in the price of dairy products produced domestically will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
84. In the United States, if the price of imported oil rises so that the price of gasoline and heating oil rise the
a. GDP deflator rises much more than does the consumer price index.
b. consumer price index rises much more than does the GDP deflator.
c. GDP deflator and the consumer price index rise by about the same amount.
d. consumer price index rises slightly more than does the GDP deflator.
85. Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of
athletic apparel increases, the GDP deflator will a. increase less than will the consumer price index.
b. increase more than will the consumer price index.
c. not increase, but the consumer price index will increase.
lOMoARcPSD| 46578282
d. increase, but the consumer price index will not increase.
86. Suppose that U.S. mining (khai thác mỏ) companies purchase German-made ore trucks at a reduced price.
By itself what will this do to the GDP deflator and the consumer price index? a. The consumer price
index will fall, and the GDP deflator will fall.
b. The consumer price index and the GDP deflator will be unaffected.
c. The consumer price index will fall, and the GDP deflator will be unaffected.
d. The consumer price index will be unaffected, and the GDP deflator will fall.
87. If the price of U.S.-made power tools increases, the consumer price index
a. and the GDP deflator will both increase.
b. will increase, and the GDP deflator will be unaffected.
c. will be unaffected, and the GDP deflator will increase.
d. and the GDP deflator will both be unaffected.
88. The price of imported athletic shoes produced by a U.S. company operating in Thailand increases. By
itself what effect will this change have on the GDP deflator and on the CPI? a. The GDP deflator and
the CPI will both increase.
b. The GDP deflator will increase and the CPI w6ill be unaffected.
c. The GDP deflator and the CPI will both be unaffected.
d. The GDP deflator will be unaffected and the CPI will increase.
89. A Brazilian company produces soccer balls in the United States and exports all of them. If the price of the
soccer balls increases, the GDP deflator a. and the CPI both increase.
b. is unchanged and the CPI increases.
c. increases and the CPI is unchanged.
d. and the CPI are unchanged.
90. A German automobile company produces cars in the United States, some of which are exported to other
nations. If the price of these cars increases, the GDP deflator a. and the CPI will both increase.
b. will increase and the CPI will be unchanged.
c. will be unchanged and the CPI will increase.
d. and the CPI will both be unchanged.
97. The CPI and the GDP deflator
a. generally move together.
b. generally show different patterns of movement.
c. always show identical changes.
d. always show different patterns of movement.
98. What is the purpose of measuring the overall level of prices in the economy?
a. to allow the measurement of GDP
b. to allow consumers to know what kinds of prices to expect in the future
c. to allow comparison between dollar figures from different points in time
d. to allow government officials to determine whether the value of the dollar has increased or
decreased
99. Babe Ruth's 1931 salary was $80,000. The price index for 1931 is 15.2 and the price index
for 2001 is 177. Ruth's 1931 salary was equivalent to a 2001 salary of about a. $93,000.
b. $930,000.
c. $1,930,000.
d. $9,300,000.
101. Suppose that the CPI is currently 400 and was 100 in 1969. Then according to the CPI, $100 today
purchases the same amount of goods and services as a. $25 in 1969.
b. $40 in 1969.
c. $60 in 1969.
lOMoARcPSD| 46578282
d. None of the above are correct.
102. Suppose that the CPI is currently 200 and was 40 in 1950. Then according to the CPI, $1 in 1950
purchased the same number of goods and services as a. $5 today.
b. $4 today.
c. $3 today.
d. None of the above is correct.
127. Interest represents a payment
a. now for money to be transferred in the future.
b. in the future for a transfer of money in the past.
c. in the past for money transferred now.
d. All of the above are correct.
Which is the most accurate statement about the relationship between inflation and interest rates?
e. There is no relationship between inflation and interest rates.
f. The interest rate is determined by the rate of inflation.
g. In order to fully understand inflation, we need to know how to correct for the effects of
interest rates.
h. In order to fully understand interest rates, we need to know how to correct for the effects of
inflation.
128. Which of the following is the most accurate statement about the relationship between the nominal interest
rate and the real interest rate?
a. The real interest rate is the nominal interest rate times the rate of inflation.
b. The real interest rate is the nominal interest rate minus the rate of inflation.
c. The real interest rate is the nominal interest rate plus the rate of inflation.
d. The real interest rate is the nominal interest rate divided by the rate of inflation.
129. If the nominal interest rate is 8 percent and rate of inflation is 3 percent, the real interest rate isa. 11
percent.
b. 24 percent.
c. 5 percent.
d. 3.75 percent.
130. If the nominal interest rate is 5 percent and the rate of inflation is 10 percent, the real interest rate isa. 2
percent.
b. 5 percent.
c. –2 percent.
d. –5 percent.
131. If the nominal interest rate is 8 percent and rate of inflation is 2 percent, the real interest rate is
a. 16 percent.
b. 10 percent.
c. 6 percent.
d. 4 percent.
132. 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.
d. the purchasing power in your bank account.
133. The real 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.
| 1/123

Preview text:

lOMoAR cPSD| 46578282 ● CHAPTER 10 1.Macroeconomists study
a. decisions of households and firms.
b. economy-wide phenomena.
c. the interaction of households and firms.
d. regulations of firms and unions.
2. Which of the following headlines would be more closely related to what microeconomists study
than what macroeconomists study?
a. Unemployment rate rises from 5 percent to 5.5 percent.
b.Real GDP grows by 3.1 percent in the third quarter.
c. Retail sales at stores show large gains.
d. The price of oranges rises after an early frost.
3. Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?
a. Why do prices in general rise by more in some countries than others?
b. Why do wages differ across industries?
Why do production and income increase in some periods and not in others?
d. Why has average income increased over time?
4. Macroeconomics includes the study of topics such as
a. national output, the inflation rate, and the trade deficit.
b. the price of Cisco stock, wage differences between genders, and antitrust laws.
c. differences in market structure, and how consumers maximize utility.
d. None of the above are correct.
5. The goal of macroeconomics is
a. to explain how economic changes affect prices of particular goods.
b. to devise policies to deal with market failures such as externalities and monopoly.
c. to explain changes that affect households and firms in general.
d. None or the above are correct.
6. The basic tools of supply and demand are
a. useful only in the analysis of economic behavior in individual markets.
b. useful in analyzing the overall economy, but not in analyzing individual markets.
c. not particularly usetul in eitner macroeconomic or microeconomic analysis
d. central to macroeconomic analysis as well as to microeconomic analysis.
7. Which of the following statistics is the best single measure of an economy's well-being? a. the unemployment rate b. the inflation rate c. GDP d. the trade deficit
8. Which of the following is correct for an economy?
a. Income is greater than production.
b. Production is greater than income.
c. Income always equals production.
d. Income equals production only when saving is zero. lOMoAR cPSD| 46578282 9. Robert works as a lawyer.
a. GDP computations should be made using his income from providing legal services, not his production of legal services.
b. GDP computations should be made using his production, not his income from providing legal services.
c. GDP computations should include both his income and his production.
d. GDP computations should include either his income or his production, but not both. 10. If GDP rises.
a. income and production must both rise.
b. income and production must both fall.
c. income must rise, but production may rise or fall.
d. production must rise, but income may rise or fall.
11. In a simple circular-flow diagram total income and total expenditure are
a. seldom equal because of the dynamic changes which occur in an economy.
b. equal only when all goods and services produced are sold.
c. always equal because every transaction has a buyer and seller.
d. always equal because of accounting rules
12. In a simple circular-flow diagram, total income and total expenditures in an economy are
a. equal because firms are ultimately owned by households.
b. equal only it there is no saving
c. equal because every transaction has a buyer and a seller.
d. never equal because some peoples income is not for production.
13. Firms use the money they get from a sale for a. paying wages. b. making a profit. c. paying rents.
d. All of the above are correct.
14. The simple circular-flow diagram illustrates that
a. production generates income so that income and production are the same.
b. the economy's income exceeds its production.
c. the production of an economy exceeds its income.
d. None of the above are necessarily correct.
15. In an economy consisting of only households and firms, GDP can be computed by
a. adding up the total expenditures of households.
b. adding up the total income paid by firms.
c. Either a or b are correct.
d. None of the above are correct.
16. Production equals income because
a. by law firms must pay out all their revenue as income to someone.
b. for every sale there is a buyer and a seller.
c. because ultimately firms are owned by households.
d. None of the above are correct.
17. Which of the following is the correct definition of GDP?
a. the market value of all goods produced within a country
b. the market value of all final goods and services produced by the citizens of a country lOMoAR cPSD| 46578282
c. the market value of all final goods and services produced within a country
d. None of the above are correct. 18. To compute GDP we
a. simply sum the number of final goods and services.
b. sum the cost of producing final goods and services.
c. use weights determined by a survey regarding how much people value different sorts of goods and
services to compute GDP as a weighted average.
d. sum the market values of final goods and services.
19. In order to include many different products in an aggregate measure, GDP is computed using
a. values of goods based on surveys of consumers.
b. primarily market prices.
c. primarily costs of production.
d. weights that are computed by how much of a particular good is produced relative to total output .
20. GDP is computed using market prices as the value of final goods and services because
a. market prices don’t change much, so it is easy to make comparisons between years.
b. if market prices are out of line with how people value goods, the government sets ceilings and floors on them.
c. market prices reflect the value of goods and services.
d. None of the above are correct; the government does not use market prices to compute GDP
21. Which of the following is not included in GDP?
a. unpaid cleaning and maintenance of houses
b. services such as those provided by lawyers and hair stylists
c. the estimated rental value of owner-occupied housing
d. production of foreign citizens living in the United States
22. The value of housing service provided by the economy’s stock of houses is
a. not included in GDP since it is not sold on the market.
b. counted and is valued as the mortgage payment made on the house.
c. counted and uses only the purchase price of the house in the year it is sold.
d. counted and is based on an estimate of its rental value.
23. Suppose that an apartment complex converts to a condominium where the renters are now owners of their former apartments.
a. The rent was included in GDP; the purchases of the condominiums are not.
b. The rent was included in GDP, and so is the purchase of the condominiums.
c. The rent was not included in GDP; the purchases of the condominiums are.
d. Neither the rent of the apartments nor the purchases of the condominium are included in GDP .
24. Suppose that an apartment complex converts to a condominium where the renters are now
owners of their former apartments. Suppose that an estimate of the value of the condominium
owners’ housing services is now the same as their former rent. a. GDP necessarily increases. b. GDP necessarily decreases.
c. GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP.
d. GDP is unaffected because previously rent was included in GDP, and now it is replaced by
theestimate of the value of housing services.
25. Which of the following non-market goods or services is included as an estimate in U.S. GDP?
a. the value of unpaid housework lOMoAR cPSD| 46578282
b. the value of vegetables that people grow in their gardens
c. the estimated rental value of owner-occupied homes
d. None of the above are correct.
26. Over the last few decades Americans have chosen to cook less at home and eat more
at restaurants. This change in behavior, by itself, a. increased measured GDP. b. reduced measured GDP.
c. did not affect measured GDP.
d. affected measured GDP only to the extent that people eat more at restaurants than at home
27. Over time people have come to rely more on market-produced goods and less on goods that
they produce for themselves. For example people eat at restaurants relatively more and prepare their
own meals at home relatively less. By itself this change would a. make GDP fall over time.
b. not make any change in GDP over time.
c. make GDP rise over time.
d. change GDP, but in an uncertain direction.
28. Ralph pays someone to mow his lawn. Norton mows his own lawn.
a. Only what Ralph pays to have his lawn mowed is included in GDP.
b. What Ralph pays to have his lawn mowed and the estimated value to Norton of mowing his own lawn are both included in GDP.
c. Neither what Ralph pays nor the estimated value of Norton’s mowing is included in GDP.
d. The answer depends on what Norton reports to survey takers.
29. Jim is a chef at a restaurant. Sally prepared her own meals during the first quarter of 2002,
and then ate at Jim’s restaurant every day in the second quarter of 2002. Sally’s change of habit a. necessarily raises GDP. b. necessarily reduces GDP.
c. raises GDP only if the restaurant meals are more expensive than the estimated value of Sally’s meals. d. has no impact on GDP.
30. If Susan decides to change the oil in her car herself instead of having Speedy Lube change the oil for her GDP a. necessarily rises. b. necessarily falls.
c. will be unaffected because the same service is produced in either case.
d. will be unaffected because car maintenance is not included in GDP.
31. A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. This move
a. necessarily raises GDP.
b. necessarily decreases GDP.
c. doesn’t change GDP because gambling is never included in GDP.
d. doesn’t change GDP because in either case his income is included.
32. A professional gambler moves from a state where gambling is legal to a state where gambling is illegal. This move a. necessarily raises GDP.
b. necessarily decreases GDP.
c. doesn’t change GDP because gambling is never included in GDP.
d. doesn’t change GDP because in either case his income is included.
33. If a state made an illegal activity such as gambling or prostitution legal, then other things the same GDP lOMoAR cPSD| 46578282
a. necessarily increases.
b. necessarily decreases.
c. doesn’t change because both legal and illegal production are included in GDP.
d. doesn’t change because these activities are never included in GDP.
34. If a state legalized gambling and then reversed its decision and made gambling illegal, then other things the same GDP a. necessarily increases.
b. necessarily decreases.
c. doesn’t change because both legal and illegal production are included in GDP.
d. doesn’t change because gambling is never included in GDP.
35. Roommates Grace and Kelly are sharing household chores and think they have an even
exchange. Other things the same, if instead they paid each other for the chores the other did GDP would a. rise. b. fall
c. be unaffected because paid or not, household chores are not included in GDP.
d. be unaffected because paid or not, household chores are included in GDP.
36. Which of the following is correct?
a. The value of all intermediate goods and final goods are included in GDP.
b. The value of intermediate goods are included in GDP only if they were produced in the previous year.
c. The value of intermediate goods are included in GDP only if they are purchased by firms rather than households.
d. The value of intermediate goods are not included in GDP. 37. GDP
a. includes the value of intermediate goods so we can get a measure of sales
b. excludes the value of intermediate goods because they are too difficult to measure.
c. excludes the value of intermediate goods because their value is already counted in the value offinal goods.
d. None of the above are correct.
38. The total sales of all firms in the economy for a year a. equals GDP for the year.
b. is larger than GDP for the year.
c. is smaller than GDP for the year. d. equals GNP for the year. 39. Grapes are
a. always counted as an intermediate good.
b. counted as an intermediate good only if they are used to produce another good like wine.
c. counted as an intermediate good only if they are consumed.
d. counted as an intermediate good whether they are used to produce another good or consumed. 40. Flour is
a. always counted as an intermediate good.
b. counted as an intermediate good if it is used by a company to make bread.
c. counted as a final good if it is used by a consumer who bakes bread for his own consumption.d. Both b and c are correct. lOMoAR cPSD| 46578282 41. Gasoline is
a. always considered an intermediate good.
b. counted as a final good if a company uses it to provide transportation services.
c. counted as a final good if a consumer uses it to run a lawnmower to mow her yard. d. Both b and c are correct.
42. Goods that go into inventory and are not sold during the current period are
a. counted as intermediate goods and so are not included in current period GDP.
b. counted in current GDP only if the firm that produced them sells them to another firm.
c. included in current period GDP as inventory investment.
d. included in current period GDP as consumption.
43. The local Chevrolet dealership has an increase in inventory of 25 cars in 2003. In 2004 it sells all 25 cars.
a. The value of increased inventory will be counted as part of GDP in 2003, but the value of the cars
sold in 2004 will not cause GDP to increase.
b. The value of the increased inventory will not affect 2003 GDP, but will be included in 2004 GDP.
c. The value of the increased inventory will be counted as 2003 GDP and the value of the cars sold in 2004 will increase 2004 GDP.
d. None of the above are correct.
44. A movie company makes 500,000 DVDs of one of its latest releases. It sells 300,000 of them
before the end of the second quarter, and holds the others in its warehouse.
a. Since the DVDs will eventually be bought by consumers, they are included as consumption in the second quarter.
b. Since the DVDs were not purchased this quarter, they will be counted as an increase in third-quarter GDP.
c. The DVDs will be counted as a change in inventory in the second quarter and so will be
included in secondquarter GDP.
d. The DVDs will be counted as a change in inventory in the second quarter, and when sold in the third quarter will raise GDP.
45. George buys and lives in a newly constructed home he paid $200,000 for in 2003. He sells the house in 2004 for $225,0000.
a. The 2004 sale increases 2004 GDP by $225,000 and does nothing to 2003 GDP.
b. The 2004 sale increases 2004 GDP by $25,000 and does nothing to 2003 GDP.
c. The 2004 sale does not increase 2004 GDP and does nothing to 2003 GDP.
d. The 2004 sale increases 2004 GDP by $225,000 and 2003 GDP is revised upward by $25,000.
46. Darla, a Canadian citizen, only works in the United States. The value added to production from her employment is
a. included in both U.S. GDP and U.S. GNP. b. included only in U.S. GDP.
c. included only in U.S. GNP.
d. not included in either U.S. GDP or U.S. GNP.
47. Greg, a U.S. citizen, works only in Canada. The value added to production from his employment is
a. included in both U.S. GDP and U.S. GNP. b. included only in U.S. GDP.
c. included only in U.S. GNP.
d. not included in either U.S. GDP or U.S. GNP.
48. Anna, a U.S. citizen, works only in Germany. The value added to production from
her employment is included a. only in U.S. GDP. lOMoAR cPSD| 46578282 b. only in German GDP.
c. in both German and U.S. GDP.
d. in neither German nor U.S. GDP.
49. An Italian company opens a pasta company in the U.S. The profits from this pasta company are included in a. both U.S. and Italian GNP. b. both U.S. and Italian GDP.
c. U.S. GDP and Italian GNP. d. U.S. GNP and Italian GDP.
50. An American company owns a fast food restaurant in Romania. The value of goods and services it produces is included
a. in both Romanian and U.S. GDP.
b. partly in Romanian GDP and partly in U.S. GDP.
c. in Romanian GDP, but not U.S. GDP.
d. in U.S. GDP, but not Romanian GDP.
51. Which of the following is included in GDP?
a. the sale of stocks and bonds b. the sale of used goods
c. the sale of services such as visits to a doctor
d. All of the above are correct
52. Which of the following is included in GDP?
a. the sale of stocks and bonds
b. the estimated rental value of owner occupied housing
c. unpaid production of goods and services at home
d. All of the above are correct.
53. Which of the following is included in U.S. GDP?
a. goods produced by foreign citizens working in the United States
b. the difference in the price of the sale of an existing home and its original purchase pricec. known illegal activities
d. None of the above are correct.
54. Which of the following is counted in U.S. GDP?
a. final goods and services purchased by the government
b. both the peaches used by a bakery to make peach pies and the peach pies
c. goods and services produced by U.S. citizens working in foreign countries
d. None of the above are correct.
55. Which of the following is counted in GDP?
a. the estimated value of housework
b. the value of illegally produced goods and services
c. the value of newly issued stocks and bonds
d. None of the above are correct.
56. U.S. GNP is calculated from U.S. GDP by
a. including income earned by foreigners in the United States and excluding income earned by U.S. citizens abroad. lOMoAR cPSD| 46578282
b. including income earned by U.S. citizens abroad and excluding income earned by foreigners in the U.S.
c. including income earned by foreigners in the United States.
d. excluding income earned by U.S. citizens abroad.
75. In computing GDP, investment is spending on
a. stocks, bonds, and other financial assets.
b. real estate and financial assets.
c. new capital equipment, inventories, and structures, including new housing.
d. capital equipment, inventories, and structures, excluding household purchases of new housing.
76. Government purchases include spending on goods and services by
a. the federal government only.
b. state and federal governments only.
c. local, state and federal governments.
d. local and state governments, but not the federal government.
77. If you buy a burger and fries at your favorite fast food restaurant
a. neither GDP nor consumption spending will be affected because you would have eaten at home if you
hadn't eaten at the restaurant.
b. GDP will be higher, but consumption spending will be unchanged.
c. GDP will be unchanged, but consumption spending will be higher.
d. both GDP and consumption spending will be higher.
78. Consider two things that might be included in GDP: A. The estimated rental value of
owneroccupied housing, and B. Purchases of newly constructed homes. a. Both A and B are included as consumption.
b. A is included as consumption, while B is included as investment.
c. B is included as consumption, while A is included as investment.
d. Only B is included in GDP and it is included as investment.
79. When a firm produces consumer goods and adds some to inventory rather than selling it. It is
a. not counted in the current quarter GDP.
b. counted in the current quarter GDP as investment.
c. counted in the current quarter GDP as consumption.
d. counted in the current quarter GDP as a statistical discrepancy
80. A firm produces consumer goods and adds some to inventory in the third quarter. In the fourth
quarter the firm sells the goods at a retail outlet which leaves their inventory diminished. As a
result of these actions, what component(s) of real GDP change in the fourth quarter? a. only investment and it decreases
b. only consumption and it increases
c. Investment decreases and consumption increases.
d. None of the above is correct.
81. A U.S. publisher purchases new computers. This purchase by itself makes
a. investment and GDP higher.
b. investment higher and leaves GDP unchanged.
c. investment higher and reduces GDP.
d. neither investment nor GDP higher.
82. A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result lOMoAR cPSD| 46578282
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.
83. If a U.S. citizen buys a television made in Korea by a Korean firm,
a. U.S. net exports decrease, and U.S. GDP decreases.
b. U.S. net exports are unaffected, and U.S. GDP decreases.
c. U.S. net exports are unaffected, and U.S. GDP is unaffected.
d. U.S. net exports decrease but U.S. GDP is unaffected.
84. If a U.S. household buys a $75 handbag from Italy, U.S. consumption increases by $75, U.S.
a. imports increase by $75, and U.S. GDP increases by $75.
b. imports increase by $75, but U.S. GDP is unaffected.
c. imports are unaffected, and U.S. GDP is unaffected.
d. exports increase by $75, and U.S. GDP increases by $75.
85. Steph buys a designer dress produced by an American-owned fashion shop in France. As a result,
U.S. consumption increases, U.S. net exports
a. decrease, U.S. GDP is unaffected, but U.S. GNP increases.
b. decrease, U.S. GDP increases, but U.S. GNP is unaffected.
c. decrease, U.S. GNP increases, but French GDP is unaffected.
d. are unaffected, U.S. GDP is unaffected, but French GDP increases
86. A German citizen buys an automobile produced in the United States by a Japanese company. As a result,
a. U.S. net exports increase, U.S. GNP and GDP are unaffected, Japanese GNP increases, German net
exports decrease, and German GNP and GDP are unaffected.
b. U.S. net exports, GNP, and GDP increase, Japanese GDP increases, German net exports decrease, and German GDP is unaffected.
c. U.S. net exports and GDP increase, Japanese GNP increases, German net exports decrease, and
German GDP and GNP are unaffected.
d. U.S. net exports, GNP, and GDP are unaffected, Japanese GNP increases, German net exports
decrease, and German GDP and GNP fall.
87. After the terrorist attack on September 11, governments raised expenditures to increase security at
airports. These purchases of goods and services are
a. not included in GDP since they are not productive.
b. not included in GDP since the government will have to raise taxes to pay for them.
c. included in GDP since government expenditures are included in GDP.
d. included in GDP only to the extent that the Federal, and not state or local governments, paid for them.
88. The U.S. Air Force pays a Turkish citizen $30,000 to work on a U.S. base in Turkey. As a result,
a. U.S. government purchases increase by $30,000 and U.S. net exports decrease by $30,000. U.S.
GDP and GNP are unaffected.
b. U.S. government purchases increase by $30,000 and U.S. GNP increases by $30,000. U.S. GDP and net exports are unaffected.
c. U.S. government purchases, net exports, GDP, and GNP are unaffected.
d. U.S. government purchases increase by $30,000 and U.S. net exports decrease by $30,000. U.S.
GNP increases by $30,000, but U.S. GDP is unaffected. lOMoAR cPSD| 46578282
89. A wind farm in Iowa buys a large turbine generator from a Swedish-owned factory located in
Connecticut that uses local workers.
a. U.S. investment, GDP, and GNP all increase by the same amount.
b. U.S. investment increases, but GDP and GNP are unaffected by the purchase.
c. U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a smaller amount.
d. U.S. investment and GNP increase by the same amount, but U.S. GDP increases by a smaller amount. 90. A transfer payment is
a. a payment for moving expenses a worker receives when he or she is transferred by an employer to anew location.
b. a payment that is automatically transferred from your bank account to pay your utility bill.
c. the term that is used to indicate that your paycheck has been automatically deposited to your bank account
d. a form of government spending that is not made in exchange for a currently produced good or service
Chapter 11: Measuring the Cost of Living MULTIPLE CHOICE 1.
Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball
players can earn 200 times as much as Babe Ruth in 1931. However, prices have also risen
since 1931. We can conclude that
a. the best baseball players today are about 200 times better off than Babe Ruth was in 1931.
b. because prices have also risen, the standard of living of baseball stars hasn’t changed since 1931.
c. one cannot make judgments about changes in the standard of living based on changes in
prices and changes in incomes.
d. one cannot determine whether baseball stars today enjoy a higher standard of living
than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931. 2.
When the consumer price index rises, the typical family
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. 3.
The consumer price index is used to
a. track changes in the level of wholesale prices in the economy.
b. monitor changes in the cost of living.
c. monitor changes in the level of real GDP.
d. track changes in the stock market. 4.
The term “inflation” is used to describe a situation in which a. the
overall level of prices in the economy is increasing.

b. incomes in the economy are increasing.
c. stock-market prices are rising.
d. the economy is growing rapidly. lOMoAR cPSD| 46578282 5.
When the overall level of prices in the economy is increasing, we
say that the economy is experiencing a. economic growth. b. inflation. c. unemployment. d. deflation. 6.
The inflation rate is defined as the a. price level.
b. change in the price level.
c. price level divided by the price level in the previous period.
d. percentage change in the price level from the previous period. 7.
The CPI is a measure of the overall cost of
a. inputs purchased by a typical producer.
b. goods and services bought by a typical consumer.
c. goods and services produced in the economy.
d. stocks on the New York Stock Exchange. 8.
Which of the following agencies calculates the CPI?
a. the National Price Board
b. the Department Of Weight and Measurements 1
c. the Bureau of Labor Statistics
d. the Congressional Budget Office 9. The CPI is calculated a. weekly. b. monthly. c. quarterly. d. yearly.
10. What is the basket of goods used to construct the CPI? a.
a random sample of all goods and services produced in the economy b.
the goods and services typically bought by consumers, according to Bureau of Labor Statistics surveys c.
goods and services weighted by the ratio of expenditures on them relative to the consumption component of GDP d.
the least and the most expensive goods and services in each major category of consumer expenditures
11. Which goods are supposed to be included in the CPI? a.
all goods and services produced in the economy b.
all goods and services that typical consumers buy c.
all goods and services in the consumption component of the GDP accounts d.
all the goods, but not the services, in the consumption component of the GDP accounts
12. In the CPI, goods and services are weighted according to a.
how much consumers buy of each item. b.
whether the goods and services are necessities or luxuries. c.
the levels of production of the goods and services in the domestic economy. d.
by the expenditures on them in the GDP national income accounts. lOMoAR cPSD| 46578282
13. How are the weights on the various goods and services in the CPI basket determined? a.
All goods and services are weighted equally. b.
A survey is conducted to determine how much of each good and service typical consumers purchase. c.
the weights equal the ratio of expenditures on each good or service divided by thetotal
consumption expenditures in the GDP accounts.
d.
Each good and service is weighted according to its price.
14. The steps involved in calculating the consumer price index include, in order: a.
choose a base year, fix the basket, compute the inflation rate, compute the basket’s cost, and compute the index. b.
choose a base year, find the prices, fix the basket, compute the basket’s cost, and compute the index. c.
fix the basket, find the prices, compute the basket’s cost, choose a base year and compute the index. d.
fix the basket, find the prices, compute the inflation rate, choose a base year and compute the index. \
Use the table below to answer the following two questions. year peaches pecans 2000 $11 per bushel $6 per bushel 2001 $9 per bushel $10 per bushel
15. Suppose that the typical consumer basket consists of 10 bushels of peaches and 15 bushels of pecans
and that the base year is 2000. What is the consumer price index for 2001? a. 100 b. 120 c. 200 d. 240
16. What was the inflation rate in 2001? a. 20 percent b. 16.7 percent c. 10 percent d. 8 percent
Use the table below to answer the following two questions. year price of price of corn pork 2003 $20 $20 2004 $20 $30
17. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn. What is the
consumer price index for 2004 if the base year is 2003? a. 100 b. 105 c. 115 d. 120
18. Suppose that the basket of goods in the CPI consisted of 3 units of pork and 2 units of corn. What is the
inflation rate for 2004? a. 33.3 percent b. 25 percent c. 20 percent d. 15 percent lOMoAR cPSD| 46578282
19. The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts
and 2 pants. In 2001 bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each and pants cost $10.00 per pair.
In 2002 bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each and pants cost
$12.00 per pair. What was the inflation rate, as measured by the CPI, for Aquilonia between 2001 and 2002? 56/45 a. 30 percent b. 24.4 percent c. 21.6 percent
d. It is impossible to determine without knowing the base year.
Use the following information to answer the next four questions.
In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of
bread, 3 robes and 2 gallons of gasoline. The per-unit prices of these goods have been as follows: Year Apples Bread Robes Gasoline 199 $1.00 $2.00 $10.00 $1.00 9 200 $1.00 $1.50 $9.00 $1.50 0 200 $2.00 $2.00 $11.00 $2.00 1 200 $3.00 $3.00 $15.00 $2.50 2
20. What was the inflation rate, as measured by the CPI, between 1999 and 2000? a. –8.89 percent b. –7.14 percent c. 3.75 percent lOMoAR cPSD| 46578282
d. It is impossible to determine without knowing the base year.
21. What was the inflation rate, as measured by the CPI, between 2000 and 2001? a. 28.5 percent b. 34.2 percent c. 47 percent
d. It is impossible to determine without knowing the base year.
What was the inflation rate, as measured by the CPI, between 2001 and 2002? e. 40 percent f. 40.25 percent g. 46.46 percent
h. It is impossible to determine without knowing the base year.
22. For the CPI, the base year is a.
the benchmark against which other years are compared, and it changes each year. b.
the benchmark against which other years are compared, and it changes occasionally.c. the year the CPI first appeared. d. always 1989.
23. For any given year, the CPI is the price of the basket of goods and services in the a.
given year divided by the price of the basket in the base year, then multiplied by 100. b.
given year divided by the price of the basket in the previous year, then multiplied by 100. c.
base year divided by the price of the basket in the given year, then multiplied by 100. d.
previous year divided by the price of the basket in the given year, then multiplied by 100.
24. The inflation rate is calculated a.
from a survey of consumer spending. b.
by adding up the price increases of all goods and services. c.
by computing a simple average of the price increase in all goods and services. d.
by determining the percentage increase in the price index from the preceding period.
25. If this year the CPI is 125 and last year it was 120, then we know that a.
all goods have become more expensive. b.
the price level has increased. c.
the inflation rate has increased. d.
All of the above are correct.
26. If the consumer price index was 100 in the base year and 107 the following year, the inflation rate was a. 107 percent. b. 10.7 percent. c. 7 percent.
d. None of the above are correct.
27. If the price index in the first year was 90, in the second year was 100, and in the third year was 95, the economy experienced a.
10 percent inflation between the first and second years and 5 percent inflation between the second and third years. b.
10 percent inflation between the first and second years and 5 percent deflation between the second and third years. c.
11 percent inflation between the first and second years and 5 percent inflation between the second and third years. d.
11 percent inflation between the first and second years and 5 percent deflation between the second and third years.
28. The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the
deflation rate between the first and second year, and between the second and third year? a.
11 percent between the first and second year, 11 percent between the second and third year lOMoAR cPSD| 46578282 b.
11 percent between the first and second year, 12 percent between the second and third year c.
10 percent between the first and second year, 11 percent between the second and third year d.
10 percent between the first and second year, 12 percent between the second and third year
29. The price index in the first year is 125, in the second year is 150, and in the third year is 200. What is
the inflation rate between the first and second year and between the second and third year?
a. 20 percent between the first and second year, 33 percent between the second and third year
b. 25 percent between the first and second year, 75 percent between the second and third year
c. 25 percent between the first and second year, 50 percent between the second and third year
d. 50 percent between the first and second year, 100 percent between the second and third year
30. Which change in the price index shows the greatest rate of inflation: 100 to 110, 150 to 165, or 180 to 198? 31. a. 100 to 110 b. 150 to 165 c. 180 to 198
d. All changes show the same rate of inflation.
32. Which change in the price index shows the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to
170? a. 80 to 100 b. 100 to 120 c. 150 to 170
d. All changes show the same rate of inflation.
33. From October 2001 to October 2002 the CPI in Canada rose from 116.5 to 119.8. In Mexico it rose from 97.2 to 102.3
What were the inflation rates for Canada and Mexico?
a. 3.3 percent and 6.7 percent
b. 3.3 percent and 5.1 percent
c. 2.8 percent and 6.7 percent
d. 2.8 percent and 5.2 percent
34. The price index in 2001 is 120, and in 2002 the price index is 127.2. What is the inflation rate? a. 5 percent b. 6 percent c. 8 percent
d. The inflation rate is impossible to determine without knowing the base year.
35. The price index is 320 in one year and 360 in the next. What was the inflation rate? a. 6.7 percent b. 8 percent c. 11.1 percent d. 12.5 percent
36. The price index is 270 in one year and 300 in the next. What was the inflation rate? a. 9.3 percent b. 10 percent c. 11.1 percent
d. None of the above are correct.
37. The price index is 180 in one year and 210 in the next. What was the inflation rate? a. 16.7 percent b. 14.3 percent c. 11.1 percent
d. None of the above are correct.
38. An inflation rate calculated using the CPI shows the rate of change of a. all prices.
b. the prices of all final goods and services.
c. the prices of all consumer goods. lOMoAR cPSD| 46578282
d. the prices of some consumer goods.
39. From 2000 to 2001 the CPI for medical care rose from 260.8 to 272.8. What was the inflation rate for medical care? a. 12 percent b. 11.1 percent c. 4.9 percent d. 4.6 percent
50. The producer price index measures the cost of a basket of goods and services
a. typical of those produced in the economy.
b. produced for a typical consumer. c. sold by producers. d. bought by firms.
51. Changes in the producer price index are often thought to be useful in predicting changes in a. the stock price index.
b. the consumer price index.
c. consumer confidence.
d. the rate of output of goods and services.
52. Suppose than in 2002, the producer price index increases by 2 percent. As a result, economists most likely will predict that
a. GDP will increase in the next year.
b. next year the producer price index will fall.
c. the exchange rate will increase in the future.
d. the consumer price index will increase in the future.
53. The goal of the consumer price index is to measure changes in the a. costs of production b. cost of living.
c. relative prices of consumer goods.
d. production of consumer goods.
54. The consumer price index is
a. not very useful as a measure of the cost of living.
b. a perfect measure of the cost of living.
c. not used as a measure of the cost of living.
d. not a perfect measure of the cost of living.
55. Which of the following is not a widely acknowledged problem with the CPI as a measure of the cost of living? a. substitution bias
b. introduction of new goods
c. unmeasured quality change
d. unmeasured price change
56. The substitution bias in the consumer price index refers to the
a. substitution of new goods for old goods in the purchases of consumers.
b. substitution of quality for quantity in consumer purchases over time.
c. fact that consumers substitute toward goods that have become relatively less expensive.
d. substitution of new prices for old prices in the basket of goods from one year to the next.
57. When the relative price of a good increases, consumers will respond by buying
a. more of it and its substitutes.
b. less of it and its substitutes. lOMoAR cPSD| 46578282
c. less of it and more of its substitutes.
d. more of it and less of its substitutes.
58. Suppose the price of a quart (một lít) of milk rises from $1 to $1.25 and the price of a T-shirt rises from $8
to $10. If the CPI rises from 150 to 175 people will likely buy a. more milk and more T-shirts.
b. more milk and fewer T-shirts.
c. less milk and more T-shirts.
d. less milk and fewer T-shirts.
59. Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of coffee rises from $2 to
$2.50 . If the CPI rises from 150 to 200 people will likely buy a. more ice cream and more coffee.
b. more ice cream and less coffee.
c. less ice cream and more coffee.
d. less ice cream and less coffee.
60. By not taking into account the possibility of consumer substitution, the CPI
a. understates the cost of living.
b. overstates the cost of living.
c. may overstate or understate the cost of living depending on how much prices rise.
d. doesn’t accurately reflect the cost of living, but it is unclear if it overstates or understates the cost of living.
61. Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the
economy causes the CPI to overestimate the cost of living. This is so because
a. new goods and services are always of higher quality than existing goods and services.
b. new goods and services cost less than existing goods and services.
c. new goods and services cost more than existing goods and services.
d. when a new good is introduced, it gives consumers greater choice, thus reducing the
amountthey must spend to maintain their standard of living.
62. When the quality of a good improves the purchasing power of the dollar
a. increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
b. increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
c. decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
d. decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
63. When the quality of a good deteriorates (xuống cấp) the purchasing power of the dollar
a. increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
b. increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
c. decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
d. decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
71. Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the
soft drink section, she notices that the price of ginger ale has been increased 15 percent, so she
decides to buy some peppermint tea instead. Which problem in the construction of the CPI is
this situation most relevant to? a. substitution bias
b. introduction of new goods
c. unmeasured quality change lOMoAR cPSD| 46578282 d. income effect
78. The GDP deflator reflects the
a. level of prices in the base year relative to the current level of prices.
b. current level of prices relative to the level of prices in the base year.
c. level of real output in the base year relative to the current level of real output.
d. current level of real output relative to the level of real output in the base year.
79. An important difference between the GDP deflator and the consumer price index is that
a. the GDP deflator reflects the prices of goods and services bought by producers, whereas the
consumer price index reflects the prices of goods and services bought by consumers.
b. the GDP deflator reflects the prices of all final goods and services produced domestically,
whereas the consumer price index reflects the prices of some goods and services bought by consumers.
c. the GDP deflator reflects the prices of all final goods and services produced by a nation's
citizens, whereas the consumer price index reflects the prices of final goods and services bought by consumers.
d. the GDP deflator reflects the prices of all goods and services bought by producers and consumers,
whereas the consumer price index reflects the prices of final goods and services bought by consumers.
80. If the prices of Australian-made shoes imported into the United States increase,
a. both the GDP deflator and the consumer price index will increase.
b. neither the GDP deflator nor the consumer price index will increase.
c. the GDP deflator will increase but the consumer price index will not increase.
d. the consumer price index will increase, but the GDP deflator will not increase.
81. An increase in the price of domestically produced industrial robots will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
82. By itself a reduction in the price of large tractors imported into the United States from Russia will
a. make the GDP deflator decrease and the consumer price index to increase.
b. make the GDP deflator increase, but the consumer price index is unchanged.
c. will increase both the GDP deflator and the consumer price index.
d. will not change either the GDP deflator or the consumer price index.
83. An increase in the price of dairy products produced domestically will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
84. In the United States, if the price of imported oil rises so that the price of gasoline and heating oil rise the
a. GDP deflator rises much more than does the consumer price index.
b. consumer price index rises much more than does the GDP deflator.
c. GDP deflator and the consumer price index rise by about the same amount.
d. consumer price index rises slightly more than does the GDP deflator.
85. Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of
athletic apparel increases, the GDP deflator will a. increase less than will the consumer price index.
b. increase more than will the consumer price index.
c. not increase, but the consumer price index will increase. lOMoAR cPSD| 46578282
d. increase, but the consumer price index will not increase.
86. Suppose that U.S. mining (khai thác mỏ) companies purchase German-made ore trucks at a reduced price.
By itself what will this do to the GDP deflator and the consumer price index? a. The consumer price
index will fall, and the GDP deflator will fall.

b. The consumer price index and the GDP deflator will be unaffected.
c. The consumer price index will fall, and the GDP deflator will be unaffected.
d. The consumer price index will be unaffected, and the GDP deflator will fall.
87. If the price of U.S.-made power tools increases, the consumer price index
a. and the GDP deflator will both increase.
b. will increase, and the GDP deflator will be unaffected.
c. will be unaffected, and the GDP deflator will increase.
d. and the GDP deflator will both be unaffected.
88. The price of imported athletic shoes produced by a U.S. company operating in Thailand increases. By
itself what effect will this change have on the GDP deflator and on the CPI? a. The GDP deflator and
the CPI will both increase.

b. The GDP deflator will increase and the CPI w6ill be unaffected.
c. The GDP deflator and the CPI will both be unaffected.
d. The GDP deflator will be unaffected and the CPI will increase.
89. A Brazilian company produces soccer balls in the United States and exports all of them. If the price of the
soccer balls increases, the GDP deflator a. and the CPI both increase.
b. is unchanged and the CPI increases.
c. increases and the CPI is unchanged.
d. and the CPI are unchanged.
90. A German automobile company produces cars in the United States, some of which are exported to other
nations. If the price of these cars increases, the GDP deflator a. and the CPI will both increase.
b. will increase and the CPI will be unchanged.
c. will be unchanged and the CPI will increase.
d. and the CPI will both be unchanged.
97. The CPI and the GDP deflator
a. generally move together.
b. generally show different patterns of movement.
c. always show identical changes.
d. always show different patterns of movement.
98. What is the purpose of measuring the overall level of prices in the economy?
a. to allow the measurement of GDP
b. to allow consumers to know what kinds of prices to expect in the future
c. to allow comparison between dollar figures from different points in time
d. to allow government officials to determine whether the value of the dollar has increased or decreased
99. Babe Ruth's 1931 salary was $80,000. The price index for 1931 is 15.2 and the price index
for 2001 is 177. Ruth's 1931 salary was equivalent to a 2001 salary of about a. $93,000. b. $930,000. c. $1,930,000. d. $9,300,000.
101. Suppose that the CPI is currently 400 and was 100 in 1969. Then according to the CPI, $100 today
purchases the same amount of goods and services as a. $25 in 1969. b. $40 in 1969. c. $60 in 1969. lOMoAR cPSD| 46578282
d. None of the above are correct.
102. Suppose that the CPI is currently 200 and was 40 in 1950. Then according to the CPI, $1 in 1950
purchased the same number of goods and services as a. $5 today. b. $4 today. c. $3 today.
d. None of the above is correct.
127. Interest represents a payment
a. now for money to be transferred in the future.
b. in the future for a transfer of money in the past.
c. in the past for money transferred now.
d. All of the above are correct.
Which is the most accurate statement about the relationship between inflation and interest rates?
e. There is no relationship between inflation and interest rates.
f. The interest rate is determined by the rate of inflation.
g. In order to fully understand inflation, we need to know how to correct for the effects of interest rates.
h. In order to fully understand interest rates, we need to know how to correct for the effects of inflation.
128. Which of the following is the most accurate statement about the relationship between the nominal interest
rate and the real interest rate?
a. The real interest rate is the nominal interest rate times the rate of inflation.
b. The real interest rate is the nominal interest rate minus the rate of inflation.
c. The real interest rate is the nominal interest rate plus the rate of inflation.
d. The real interest rate is the nominal interest rate divided by the rate of inflation.
129. If the nominal interest rate is 8 percent and rate of inflation is 3 percent, the real interest rate isa. 11 percent. b. 24 percent. c. 5 percent. d. 3.75 percent.
130. If the nominal interest rate is 5 percent and the rate of inflation is 10 percent, the real interest rate isa. 2 percent. b. 5 percent. c. –2 percent. d. –5 percent.
131. If the nominal interest rate is 8 percent and rate of inflation is 2 percent, the real interest rate is a. 16 percent. b. 10 percent. c. 6 percent. d. 4 percent.
132. 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.
d. the purchasing power in your bank account.
133. The real 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.