HW 1

Question 1

When prices of different goods are increasing by different amounts, the price index that
will rise the fastest is:

Answer 1

the CPI.

Question 2

When bread is baked but put away for later sale, this is called:

Answer 2

investment in inventory.

Question 3

Which of the following is a flow variable?

Answer 3

income

Question 4

Real GDP is a better measure of economic well-being than nominal GDP, because real GDP:

Answer 4

measures changes in the quantity of goods and services produced by holding prices constant.

Question 5

If GDP (measured in billions of current dollars) is $5,465, consumption is $3,657, investment is $741, and net exports are –$1,910, then government purchases are:

Answer 5

$2,977.

Question 6

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately ______ percent.

Answer 6

7.4

Question 7

An increase in the price of imported goods will show up in:

Answer 7

the CPI but not in the GDP deflator.

Question 8

The panel of economists appointed by the Senate Finance Committee estimated that the CPI ______ inflation by approximately ______ percentage point(s) per year.

Answer 8

overestimates; 1

Question 9

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $1.50 in 2009. If 4 apples were produced in 2002 and 5 in 2009, whereas 3 oranges were produced in 2002 and 4 in 2009, then real GDP (in 2002 prices) in 2009 was:

Answer 9

$6.50.

Question 10

When a firm sells a product out of inventory to a household, investment expenditures ______ and consumption expenditures ______.

Answer 10

decrease; increase

Question 11

An example of an imputed value in the GDP is the:

Answer 11

housing services enjoyed by homeowners.

Question 12

GNP equals GDP ______ income earned domestically by foreigners ______ income that nationals earn abroad.

Answer 12

minus; plus

Question 13

If the number of employed increases while the number of unemployed does not change, the unemployment rate:

Answer 13

will decrease.

Question 14

All of the following are measures of GDP except the total:

Answer 14

expenditures of all businesses in the economy.

Question 15

The market value of all final goods and services produced within an economy in a given period of time is called:

Answer 15

gross domestic product.

Question 16

An estimate of the number of unemployed workers in the economy can be obtained from:

Answer 16

from the household survey, but not from the establishment survey

Question 17

In 2013, the GDP of the United States totaled about:

Answer 17

$16.8 trillion