Exam 2 Review

Exam 2 Review - (A) 1. If the CPI in Macroland for the year...

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(A) 1. If the CPI in Macroland for the year 1999 was 150 and the CPI for Macroland for the year 2000 was 125, then CPI inflation in Macroland for the year 2000 was approximately A. – 16.7 per cent B. + 16.7 per cent C. – 20 per cent D. + 20 per cent E. Not enough information is given in the question to calculate CPI inflation. (D) 2. Which of the following is not a measure of price levels? A. CPI (consumer price index) B. PPI (producer price index) C. GDP Deflator D. All of the above are price levels. E. None of the above is a price level. (E) 3. If nominal GDP increased in an economy, then which of the following must have happened in this economy? A. Price levels increased. B. More goods and services were produced. C. Both price levels and real GDP increased. D. Consumption increased. E. None of the above. (E) 4. Which of the following statements is/are true regarding the relationship between savings and investment as economists use the terms in national income accounting? A. Savings (S) must equal investment (I). B. If savings(S) equal investment (I), then taxes (T) must equal transfer payments (TR). C. If savings (S) equal investment (I), then taxes (T) must equal consumption (C). D. If savings (S) equal investment (I), then taxes (T) must equal government transfer payments (TR) plus government purchases (G). E. None of the above statements is true. (C) 5. If nominal GDP equals $100,000 and the GDP deflator equals 200, then real GDP equals A. $20,000,000. B. $500. C. $50,000. D. $200,000. E. None of the above. (E) 6. Which of the following statements is true? (T )I. Because the CPI ignores quality improvements, the CPI may overestimate inflation. (T) II. The CPI does not consider households’ ability to purchase fewer goods that had price increases and instead substitute more goods that did not have price increases. (T) III. The CPI did not capture substitution bias. A. I only B. III only C. I and II D. II and III E. none of the above (A through D) choices is correct (C) 7. Some researchers say that the CPI overestimates inflation in part because households can substitute less expensive goods for the good that had the price increase. Which of the following points discussed in class might these researchers not have considered? (This/these point(s) would suggest that the CPI does not overestimate inflation by as much as researchers think.) A. The PPI is a better measure of prices paid by consumers than the CPI. B.
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Exam 2 Review - (A) 1. If the CPI in Macroland for the year...

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