Deardorff_w06-F

# Deardorff_w06-F - Econ 102, Winter 2006 Final Exam -...

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Econ 102, Winter 2006 Final Exam - Answers Questions 1-2 use the data in the table below. Suppose there is a small economy. In this economy, there are 3 goods produced in 2000, 4 goods produced in 2001, and 5 goods produced in 2002 and 2003. The CPI consumption basket contains only three goods: Bottled water (50), TV sets (10) and CD players (5). Look at the following table for details of output and prices in each of the four years. 2000 2001 2002 2003 Quantities Prices Quantities Prices Quantities Prices Quantities Prices Bottled water 100 \$0.50 150 \$0.40 200 \$0.60 250 \$0.66 TV sets 10 \$200 20 \$300 30 \$350 40 \$385 CD players 5 \$50 6 \$60 7 \$70 6 \$77 Bicycles - - 10 \$90 10 \$100 10 \$110 Air conditioners - - - - 2 \$250 4 \$275 1. What is the inflation rate between 2001 and 2002 in terms of the CPI? a) 16.9% b) 18% c) 21% d) 15.9% e) 14.5% 2. Using 2002 as the base year, what is the inflation rate from 2002 to 2003 in terms of the GDP deflator? (Look at the numbers, and think, before spending too much time on this.) a) 6% b) 7% c) 10% d) 25% e) 35% 1

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6. According to the closed economy loanable funds model, what is the impact of a simultaneous decrease in government expenditure and taxes (by equal amounts)? a)

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## This test prep was uploaded on 04/02/2008 for the course ECON 102 taught by Professor Rossana during the Fall '08 term at University of Michigan.

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Deardorff_w06-F - Econ 102, Winter 2006 Final Exam -...

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