Week 5 In Class: GDP and CPT
The table below contains data for the country of Wrexington for the year 2008.
Item
Household purchases of durable goods
Household purchases of nondurable goods
Household purchases of services
Household purchases of new housing
Purchases of capital equipment
Inventory changes
Purchases of new structures
Depreciation
Salaries of government workers
Government expenditures on public works
Transfer payments
Foreign purchases of domestically produced goods
Domestic purchases of foreign goods
Amount
$1293
$1717
$301
$704
$310
$374
$611
$117
$1422
$553
$777
$88
$120
C, I, G, NX?
23. If total spending rises from one year to the next, then
a. the economy must be producing a larger output of goods and services.
b. goods and services must be selling at higher prices.
c. either the economy must be producing a larger output of goods and services, or goods and
services must be selling at higher prices, or both.
d. employment or productivity must be rising.
____ 24. The inflation rate in year 2 equals
a.
.
b.
.
c.
.
d.
.
The table below contains data for the country of Dachsland, which produces only pretzels and books. The
base year is 2005.
Year
2005
2006
2007
2008
Price
of
Pretzels
$4.00
$4.00
$5.00
$6.00
Quantity
of
Pretzels
90
100
120
150
Price
of
Books
$1.50
$2.00
$2.50
$3.50
Quantity of
Books
150
180
200
200
____ 26. Refer to Table 23-4. In 2006, Dachsland’s
a. nominal GDP was $585, real GDP was $660, and the GDP deflator was 88.6.
b. nominal GDP was $585, real GDP was $670, and the GDP deflator was 87.3.
c. nominal GDP was $760, real GDP was $660, and the GDP deflator was 115.2.
d. nominal GDP was $760, real GDP was $670, and the GDP deflator was 113.4.
____ 27. Refer to Table 23-4. Dachsland’s output grew
a. 29.9% from 2005 to 2006.
b. 33.3% from 2006 to 2007.
c. 24.3% from 2006 to 2007.
d. 15.4% from 2007 to 2008.
____ 30. Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a
population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150.
What happened to the real GDP per person?
a. It more than doubled.
b. It increased, but it less than doubled.
c. It was unchanged.
d. It decreased.
____ 2. Which of the following is correct?
a. The GDP deflator is better than the CPI at reflecting the goods and services bought by
consumers.
b. The CPI is better than the GDP deflator at reflecting the goods and services bought by
consumers.
c. The GDP deflator and the CPI are equally good at reflecting the goods and services bought
by consumers.
d. The GDP deflator is more commonly used as a gauge of inflation than the CPI is.
6.
Which of the following changes in the price index produces the greatest rate of inflation: 100 to
110, 150 to 165, or 180 to 198?
a. 100 to 110
b. 150 to 165
c. 180 to 198
d. All of these changes produce the same rate of inflation.
____ 20. Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in
2001 and 221.25 in 2006. Ruben's 2006 salary in 2001 dollars is
a. $20,000; thus, Ruben's purchasing power increased between 2001 and 2006.
b. $20,000; thus, Ruben's purchasing power decreased between 2001 and 2006.
c. $64,000; thus, Ruben's purchasing power increased between 2001 and 2006.
d. $64,000; thus, Ruben's purchasing power decreased between 2001 and 2006.
____ 23. If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is
a. -2 percent.
b. 0.4 percent.
c. 2 percent.
d. 12 percent.
____ 24. Maxine deposits $100 in a bank account that pays an annual interest rate of 20%. A year later, after
Maxine has accumulated $20 in interest, she withdraws her $120. Maxine’s purchasing power
a. did not change if the inflation rate was 0%.
b. decreased if the inflation rate was -2%.
c. increased if the inflation rate was 5%.