economy test 2

# economy test 2 - 1. A college graduate in 1972 found a job...

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1. A college graduate in 1972 found a job paying \$7,200. The CPI was 0.418 in 1972. A college graduate in 2000 found a job paying \$28,000. The CPI was 1.68 in 2000. The 1972 graduate's job paid ____ in nominal terms and ______ in real terms than the 2000 graduate's job. Student Response Correct Answer Feedback A. more; less B. more; more C. less; the same D. less, more E. less, less General Feedback: First of all divide 7200 by .418 and you get a real 1972 salary of 17,224, then take 28000 and divide by 1.68 and you get 16666. The 1972salary is 7200 is less in nominal terms, but in real terms the 1972salary of 17,224 is more than 16000 in real terms. Learning Objective: Deflating Level of Learning: Application Page: 145 Source: Web Type: Word Problem Score: 0/0 2. Deflating a nominal quantity is the process of dividing a ____ quantity by a ______ in order to express the quantity in ______ terms.

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General Feedback: Learning Objective: Deflating Level of Learning: Knowledge Page: 144 Source: Unique Type: Word Problem Score: 0/0 3. If a borrower and lender agree to an interest rate on a loan when inflation is expected to be 10% and inflation turns out to be 7% over the life of the loan, then the borrower _____ and the lender ______. General Feedback: Learning Objective: Unexpected redistribution of wealth Level of Learning: Application Page: 155 Source: Unique Type: Word Problem Score: 0/0 4.
If the price of motel rooms increases by 10% while the prices of other goods and services increase by 5 % on average, the relative price of motel rooms has: General Feedback: Learning Objective: Relative Price Level of Learning: Application Page: 151 Source: Unique Type: Word Problem Score: 0/0 5. The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 2000, the base year, the typical consumer purchased 10 books for \$20 each and 200 hamburgers for \$1 each. In 2003, the typical consumer purchased 12 books for \$23 each and 300 hamburgers for \$1.15 each. The consumer price index for 2003 on Planet Econ equals: General Feedback:

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Learning Objective: Consumer Price Index Level of Learning: Application Page: 141 Source: Unique Type: Word Problem Score: 0/0 6. The CPI in 1975 equaled 0.54. The CPI in 1976 equaled 0.57. The rate of inflation between 1975 and 1976 was ____ percent. General Feedback: Learning Objective: Rate of Inflation Level of Learning: Application Page: 143 Source: Unique Type: Word Problem Score: 0/0 7. The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2002 pizzas cost \$10 each, jeans cost \$40 per pair, and milk cost \$3 per gallon. In 2003, the price of pizzas went down to \$8 each, while the price of jeans and milk remained the same. Between 2002 and 2003, a typical family's cost of living:
General Feedback: Students: This is a question that deflation instead of inflation. To find answer 10X\$10 + 7 X \$40 + 20 X \$3 = 440 for 2002, in 2003 10 X \$8 + 7X \$40 + 20 X \$3 = 420 for 2003: 420/440=.9545 and 100 - .9545 = 4.5

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## This test prep was uploaded on 04/18/2008 for the course ECO 2013 taught by Professor Barbaramoore during the Spring '08 term at University of Central Florida.

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economy test 2 - 1. A college graduate in 1972 found a job...

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