Chapter 7 Second Homework.docx

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Chapter 7 Second Homework 1. Economists frequently use GDP per capita to reflect: both people who are employed and those who are unemployed. the impact of prices on GDP. people who are employed. differences in living standards across countries. 2. Table: Lemonade and Cookies 2013 Output 2013 Prices 2014 Output 2014 Prices 200 glasses $1 per glass 220 glasses $1 per glass 100 cookies $2 per cookie 100 cookies $2.25 per cookie Reference: Ref 7-9 (Table: Lemonade and Cookies) Look at the table Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2014 is the base year, real GDP in 2014 was: $445. $420. $425. $400. 3. The GDP deflator for a given year is 100 times _____ GDP for that year _____ GDP for that year. nominal; divided by real nominal; minus real real; plus nominal real; divided by nominal 4. The inflation or deflation rate is: computed by dividing the old price index number by the new price index number. the difference between the initial price index number and the new price index number. the change in a price index divided by the new index number. the change in a price index divided by the initial value of the index. 5. A price index: always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year. is normalized to 100 for the base year. always includes a base year. measures the cost of purchasing a market basket of output across different years. 6. Table: Lemonade and Cookies 2013 Output 2013 Prices 2014 Output 2014 Prices 200 glasses $1 per glass 220 glasses $1 per glass 100 cookies $2 per cookie 100 cookies $2.25 per cookie Reference: Ref 7-9 (Table: Lemonade and Cookies) Look at the table Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2013 is the base year, real GDP in 2013 was: $420. $400. $445.
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$425. 7. An example of investment spending is the: purchase of government bonds by a private household. purchase of a freezer by an ice-cream parlor. amount of funds raised by the government in the financial markets. purchase of stock shares by a mutual fund. 8. Reference: Ref 7-21 (Table: GDP II) Look at the table GDP II. Calculate the GDP deflator for 2010. 111 104 96 90 9. In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and $160 in 2011. Based on this information and considering 2009 as the base year, inflation from 2009 to 2011 was: 14.28%. 23.07%. 7.14%. 7.69%. 10. In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and $160 in 2011. Based on this information and considering 2009 to be the base year, the price index in 2011 was: 100.
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