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Macro homework 1

STUDY
PLAY
1. macroeconomists study
economy-wide phenomena
2. which of the following newspaper headlines is more closely related to what microeconomists study than to what macroeconomists study?
the price of oranges rises after an early frost
3. which of the following topics are more likely to be studied by a macroeconomist than by a microeconomist?
the percentage of the labor force that is out of work, and differences in average income from country to country
4. the basic tools of supply and demand are
central to macroeconomic analysis as well as to microeconomic analysis
5. which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
gross domestic product
6. gdp
is used to monitor the performance of the overall economy and is the single best measure of a society;s economic well-being
7. gross domestic product measures
income and expenditure
8. expenditures on a nation's domestic production
are equal to its domestic production
9. for an economy as a whole
income must equal expenditure
10. which of the following statements about gdp is correct?
all of the above are correct
(gdp measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services
money continuously flows from households to firms and then back to households, and gdp measures flow of money
gdp is generally regarded as the best single measure of a society's economic well-being)
11. if an economy's gdp falls, then it must be the case that the economy's
income and expenditures both fall
12. in a simple circular-flow diagram, total income and total expenditure are
always equal because every transaction has a buyer and a seller
13. in a simple circular-flow diagram
all of the above are correct
(households spend all of their income
all goods and services are bought by households
expenditures flow through the markets for goods and services, while income flows through the markets for the factors of production)
14. in a simple circular-flow diagram, households buy goods and services whit the income they get from
all of the above are correct
(wages
rents
profits)
15. gdp is defined as the
value of all final goods and services produced within a country in a given period of time
16. gross domestic product adds together many different kinds of goods and services into a single measure of the value of economic activity. to do this, gdp makes use of
market pices
17. in computing gdp, market prices are used to value final goods and services because
market prices reflect the values of goods and services
18. which of the following is included in gdp
both the market value of rental housing services and the market value of owner-occupied housing services
19. the value of the housing services provided by the economy's owner-occupied houses is
included in the gdp, and the estimated rental values of the house are used to place a value on these housing services
20. most goods and services produced at home
and most goods and services produced illegally are excluded from gdp
21. a newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. based on this information gdp most likely
decreased
22. how is net national product (NNP) calculated
depreciation losses are subtracted from the total income of a nation's citizens
23. which of the following is an example of depreciation
computers becoming obsolete
24. national income is defined as
the total income earned by a nation's permanent residents in the production of goods and services
25. the income that households and noncorporate businesses receive
personal income
26. disposable personal income is the income that
households and noncorporate businesses have left after paying taxes and non-tax payments to the government
27. disposable income is
it does not matter much which measure we use
28. in the equation Y=C+I+G+NX
Y represents the economy's total expenditure
29. the consumption component of gdp includes spending on
durable goods, nondurable goods, and services
30. consumption consists of spending by households on goods and services, with the exception of
purchases of new houses
31. when economists refer to intangible items, they are referring to such things as
hair styling and dental care, and the value of such items is included in GDP
32. household spending on education is included in
consumption, although it might be argued that it would fit better in investment
33. household spending on education is counted in which component or subcomponent of gdp
consumption of services
34. which of the following is included in the consumption component of us gdp
purchases of natural gas by us households
35. which of the following is included in the investment component of gdp?
all of the above are correct
(households' purchases of newly constructed homes
net additions to firms' inventories
firms' purchases of capital equipment)
36. which of the following examples of household spending is categorized as investment rather than consumption
expenditures on new housing
37. which of the following items is the one type of household expenditure that is categorized as investment rather than consumption
the purchase of a new house
38. which of the following is included in the investment component of gdp?
all of the above are included in the investment component
(spending to build new houses
spending to build new factories
spending on business equipment such as welding equipment)
39. Which of the following is included in the investment component of GDP?
spending on new residential construction but not spending on stocks and bonds
40. The value of goods added to a firm's inventory in a certain year is treated as
investment, since GDP aims to measure the value of the economy's production that year
41. Consumer goods that are produced, go into inventory, and are not sold during the current period are
included in current period GDP as inventory investment
42. Government purchases include spending on goods and services by
federal, state, and local governments
43. Which of the following items is counted as part of government purchases?
all of the above are correct
(The federal government pays the salary of a Navy officer.
The state of Nevada pays a private firm to repair a Nevada state highway.
The city of Las Vegas, Nevada pays a private firm to collect garbage in that city.)
44. If total spending rises from one year to the next, then
either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both
45. Changes in nominal GDP reflect
both changes in prices and changes in the amounts being produced
46. Changes in real GDP reflect
only changes in the amounts being produced
47. Real GDP is the yearly production of final goods and services valued at
constant prices
48. If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP?
$10 trillion
49. If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP?
$40 billion
50. If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was the GDP deflator ?
250
51. Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that
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
52. The consumer price index is used to
monitor changes in the cost of living over time
53. When the consumer price index rises, the typical family
has to spend more dollars to maintain the same standard of living
54. Economists use the term inflation to describe a situation in which
the economy's overall price level is rising
55. When the overall level of prices in the economy is increasing, economists say that the economy is experiencing
inflation
56. The economy's inflation rate is the
percentage change in the price level from the previous period
57. Which of the following is correct?
The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers
58. The CPI is a measure of the overall cost of
the goods and services purchased by a typical consumer
59. The CPI is a measure of the overall cost of the goods and services bought by
a typical consumer
60. The inflation rate is calculated
by determining the percentage increase in the price index from the preceding period
61. The inflation rate is calculated
by determining the percentage change in the price index from the preceding period
62. If 2004 is the base year, then the inflation rate for 2005 equals
(CPI in 2005 - CPI in 2004)/(CPI in 2004) x100
63. Refer to Table 11-1. The cost of the basket in 2005 was
$200
64. Refer to Table 11-1. The cost of the basket in 2006 was
$240
65. Refer to Table 11-1. If 2005 is the base year, then the CPI for 2005 was
100
66. Refer to Table 11-1. If 2005 is the base year, then the CPI for 2006 was
120
67. Refer to Table 11-1. If 2006 is the base year, then the CPI for 2005 was
83.3
68. Refer to Table 11-1. If 2006 is the base year, then the CPI for 2006 was
100
69. Refer to Table 11-1. If 2005 is the base year, then the inflation rate in 2006 was
20 percent
70. Refer to Table 11-1. If 2006 is the base year, then the inflation rate in 2006 was
20 percent
71. The primary purpose of measuring the overall level of prices in the economy is to
allow for the comparison of dollar figures from different points in time
72. Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 214.5 for 2009. Ruth's 1931 salary was equivalent to a 2009 salary of about
$1,128,947
73. When we express Babe Ruth's 1931 salary in today's dollars and compare his salary to those of current New York Yankee players, we find that the current median salary of today's Yankees is
more than four times Ruth's salary
74. In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 214.5 for 2009. President Hoover's 1931 salary was equivalent to a 2009 salary of about
$1,058,388
75. You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in today's prices?
five cents (today's CPI / 1962 CPI)