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Homework answers / question archive / University of California, Santa Barbara Econ 2 Spring 2010 Final 1)Tom invests $1,500 at an interest rate of 5%

University of California, Santa Barbara Econ 2 Spring 2010 Final 1)Tom invests $1,500 at an interest rate of 5%

Economics

University of California, Santa Barbara

Econ 2 Spring 2010 Final

1)Tom invests $1,500 at an interest rate of 5%. During this time the price of a laptop computer rose from $1,500 to $1,560. What does this tell us about inflation and Tom’s real return 1 year after his investment?

a.

Inflation was 6%, and Tom’s real rate of return was -1%

c.

Inflation was 5%, and Tom’s real rate of return was 0%

b.

Inflation was 6.5%, and Tom’s real rate of return was 5%

d.

Inflation was 4%, and Tom’s real rate of return was 1%

 

 

     2.   If the supply for loanable funds shifts to the left, then the equilibrium interest rate

a.

falls and the quantity of loanable funds rises.

c.

and quantity of loanable funds rise.

b.

rises and the quantity of loanable funds falls.

d.

and quantity of loanable funds fall.

 

 

     3.   If the Euro exchange rate is 1.22 (meaning it takes 1.22 dollars to buy 1 Euro) and the Argentine Peso exchange rate is 0.25 (meaning it takes 0.25 dollars to buy 1 Peso) then how many Pesos will 1 Euro purchase?

a.

4.88

c.

0.20

b.

2.25

d.

0.30

 

 

     4.   If velocity = 5, the price level = 1.5, and the real value of output is 2,500, then the quantity of money is

a.

1,050.00.

c.

8,333.33.

b.

333.33.

d.

750.00.

 

 

     5.   The opportunity cost of an item is

a.

always less than the dollar value of the item.

c.

what you give up to get that item.

b.

the number of hours that one must work in order to buy one unit of the item.

d.

always greater than the cost of producing the item.

 

 

     6.   If the budget deficit increases then

a.

saving and the interest rate falls

c.

saving rises and the interest rate falls

b.

saving and the interest rate rise

d.

saving falls and the interest rate rises

 

 

     7.   In 2007, Corny Company grows and sells $2 million worth of corn to Tasty Cereal Company, which makes corn flakes.  Tasty Cereal Company produces $6 million worth of corn flakes in 2007, with sales to households during the year of $4.5 million.  The unsold $1.5 million worth of corn flakes remains in Tasty Cereal Company’s inventory at the end of 2007. The transactions just described contribute how much to GDP for 2007?

a.

$8 million

c.

$4.5 million

b.

$6.5 million

d.

$6 million

 

 

     8.   A production possibilities frontier is a straight line when

a.

the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good.

c.

an economy is interdependent and engaged in trade instead of self-sufficient.

b.

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

d.

the rate of tradeoff between the two goods being produced is constant.

 

 

     9.   Which of the following is both a financial institution and a financial intermediary?

a.

stock exchanges

c.

the bond market

b.

banks

d.

All of the above are correct.

 

 

   10.   On which of these bonds is the prospect of default least likely?

a.

a bond issued by the federal government

c.

a bond issued by the state of Texas

b.

a bond issued by Exxon Mobil Corporation

d.

a junk bond

 

 

   11.   When there is unexpected deflation

a.

output must fall.

c.

borrowers lose and lenders gain.

b.

borrowers gain and lenders lose.

d.

the real interest rate is zero.

 

 

   12.   If an American-based firm opens and operates a new watch factory in Panama, then it is engaging in

a.

foreign financial investment.

c.

indirect foreign investment.

b.

foreign direct investment.

d.

foreign portfolio investment.

 

 

   13.   Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

a.

does not change U.S. net capital outflow.

c.

increases U.S. net capital outflow by more than the value of the bond.

b.

increases U.S. net capital outflow by the value of the bond.

d.

decreases U.S. net capital outflow.

 

 

Table 3-1

 

Assume that Sardi and Tinaka can switch between producing corn and producing pork at a constant rate.

 

 

Minutes Needed to Make 1

Bushel of Corn

Pound of Pork

Sardi

20

12

Tinaka

15

10

 

 

   14.   Refer to Table 3-1.  Sardi should specialize in the production of

a.

corn and Tinaka should specialize in the production of pork.

c.

neither good and Tinaka should specialize in the production of both goods.

b.

pork and Tinaka should specialize in the production of corn.

d.

both goods and Tinaka should specialize in the production of neither good.

 

 

   15.   Refer to Table 3-1.  Assume that Sardi and Tinaka each has 60 minutes available.  If each person spends all his time producing the good in which he has a comparative advantage, then total production is

a.

7 bushels of corn and 11 pounds of pork.

c.

3 bushels of corn and 6 pounds of pork.

b.

3.5 bushels of corn and 5.5 pounds of pork.

d.

4 bushels of corn and 5 pounds of pork.

 

 

   16.   According to Romer which of the following statements is true?

a.

 If the TARP funds go to new banks, much of them will end up stuck in financial institutions that are still bad after the transfer.

c.

Proposals to start entirely new banks could lead to huge transfers of wealth between taxpayers and bank shareholders.

b.

Turning bad banks into good banks is simpler and safer than to start entirely new banks.

d.

Investing the TARP funds in new banks will do more to help the troubled but potentially viable existing banks than giving funds directly to them.

 

 

   17.   Other things held constant, a decrease in demand for Japanese video games

a.

leads to an appreciation of the dollar.

c.

would not change the value of the dollar because of purchasing power parity.

b.

leads to a depreciation of the dollar.

d.

can lead to either an appreciation or depreciation of the exchange rate.

 

 

   18.   Purchasing Power Parity is:

a.

a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries

c.

the rate at which a person can trade the currency of one country for the currency of another

b.

             a government policy that directly influences the quantity of goods and services that a country imports or exports

d.

a situation in which exports equal imports

 

 

   19.   If we are told the exchange rate between the Brazilian real and the US$ is $0.60/R$, how much does a car which costs US$10,000 cost in Brazilian Reals, R$?

a.

R$ 16,667

c.

R$ 6,000

b.

R$ 6,667

d.

R$ 1,667

 

 

   20.   In one day Alpha Cabinet Company made 40 cabinets with 320 hours of labor. What was their productivity?

a.

1/8 cabinet per hour

c.

8 hours per cabinet

b.

40 cabinets

d.

None of the above is correct.

 

 

   21.   Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year).  Based on this scenario, which of the following statements is correct?

a.

GDP would definitely increase, despite the fact that GDP includes leisure.

c.

GDP would definitely increase because GDP excludes leisure.

b.

GDP could either increase or decrease because GDP excludes leisure.

d.

GDP could either increase or decrease because GDP includes leisure.

 

 

   22.   Suppose a Big Mac costs $3.57 in the U.S. and a Big Mac costs 33.0 Mexican Pesos in Mexico. If the official exchange rate is 12.77 pesos per dollar, then

a.

a Big Mac costs about $4 if purchased in Mexico.

c.

the peso can be said to be overvalued by about 22.3%.

b.

the peso can be said to be undervalued by about 28%.

d.

the real exchange rate can not be determined.

 

 

   23.   If inflation is higher than what was expected,

a.

creditors receive a lower real interest rate than they had anticipated.

c.

debtors pay a higher real interest rate than they had anticipated.

b.

creditors pay a lower real interest rate than they had anticipated.

d.

debtors receive a higher real interest rate than they had anticipated.

 

 

   24.   Suppose the money supply increased by 1%, velocity was unchanged, and real gdp increased by 1%, what was inflation?

a.

0%

c.

-1%

b.

1%

d.

2%

 

 

   25.   When a nation’s savings exceeds its domestic investment,

a.

its net capital outflow is positive.

c.

its net capital outflow is negative.

b.

its net capital outflow is zero.

d.

its net capital outflow can either be positive or negative depending on the real exchange rate.

 

 

Table 23-4

 

The table below contains data for the country of Dachsland, which produces only pretzels and books.  The base year is 2005.

 

Year

Price

of

Pretzels

Quantity

of

Pretzels

Price

of

Books

Quantity of

Books

2005

$4.00

90

$1.50

150

2006

$4.00

100

$2.00

180

2007

$5.00

120

$2.50

200

2008

$6.00

150

$3.50

200

 

 

   26.   Refer to Table 23-4.  Dachsland’s inflation rate from 2006 to 2007 was

a.

25%.

c.

16.4%.

b.

41.0%.

d.

44.7%.

 

 

   27.   If the quantity of money is $200, the real quantity of output is 400 and the price level is $3.00, what is the velocity of money?

a.

1.5

c.

2

b.

6

d.

6.5

 

 

   28.   Suppose Susan can wash three windows per hour or she can iron six shirts per hour.  Paul can wash two windows per hour or he can iron five shirts per hour.

a.

Susan has a comparative advantage over Paul in washing windows.

c.

Paul has a comparative advantage over Susan in ironing shirts.

b.

Susan has an absolute advantage over Paul in washing windows.

d.

All of the above are correct.

 

 

   29.   If Shawn can produce more donuts in one day than Sue can produce in one day, then

a.

Shawn has an absolute advantage in the production of donuts.

c.

Sue has an absolute advantage in the production of donuts.

b.

Sue has a comparative advantage in the production of donuts.

d.

Shawn has a comparative advantage in the production of donuts.

 

 

   30.   A country has national saving of $60 billion, government expenditures of $30 billion, domestic investment of $40 billion, and net capital outflow of $20 billion.  What is its supply of loanable funds?

a.

$100 billion

c.

$30 billion

b.

$60 billion

d.

$70 billion

 

 

   31.   Which of the following is correct?

a.

In a closed economy if national saving is greater than zero, then everyone must be saving.

c.

The financial system channels funds from savers to borrowers.

b.

In the national income accounts, investment and private saving refer to the same thing.

d.

People whose consumption exceeds their income are savers.

 

 

   32.   In an imaginary economy, consumers buy only hot dogs and hamburgers.  The fixed basket consists of 10 hot dogs and 6 hamburgers.  A hot dog cost $3 in 2006 and $5.40 in 2007.  A hamburger cost $5 in 2006 and $6 in 2007.  Which of the following statements is correct?

a.

When 2007 is chosen as the base year, the consumer price index is 100 in 2006.

c.

When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007.

b.

When 2006 is chosen as the base year, the consumer price index is 90 in 2007.

d.

When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007.

 

 

   33.   Which of the following statements are true? (BTW, ceteris paribus means everything else held constant)

a.

Ceteris paribus, the lower the price level, the higher the velocity of money will be

c.

Ceteris paribus, the lower the money supply, the higher the velocity of money will be

b.

Ceteris paribus, the higher the value of money, the higher the velocity of money will be

d.

None of the statements are true

 

 

   34.   Suppose a gardener produces both green beans and corn in her garden.  If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is

a.

2.8 bushels of corn.

c.

70 bushels of corn.

b.

14 bushels of corn.

d.

0.36 bushel of corn.

 

 

   35.   Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys)?

a.

an increase in the price of U.S. baskets of goods

c.

an increase in the number of Kenyan shillings that can be purchased with a dollar

b.

a decrease in the price in Kenyan shillings of Kenyan goods

d.

All of the above are correct.

 

 

   36.   Lucy can bake a cake in 2 hours and sew a shirt in 4 hours. Mary needs 1.5 hours to bake a cake and 3 hours to sew a shirt. Which of the following statements is most correct?

a.

None of them possesses a comparative advantage on either activity

c.

Mary’s opportunity cost of sewing a shirt is one half of a cake

b.

Lucy’s opportunity cost of baking a cake is 2 shirts

d.

Mary has a comparative advantage at baking cakes

 

 

   37.   A Japanese company exchanges Japanese yen for U.S. dollars to buy coal from the U.S.; this transaction will:

a.

increase Japanese net exports, and increase U.S. net capital outflow

c.

increase Japanese net exports, and decrease U.S. net capital outflow

b.

decrease Japanese net exports, and increase U.S. net capital outflow

d.

decrease Japanese net exports, and decrease U.S. net capital outflow

 

 

Table 24-3

 

The table below pertains to Studious, an economy in which the typical consumer’s basket consists of 5 books and 10 calculators.

 

Year

Price of a

Book

Price of a

Calculator

2006

$24

$8

2007

$30

$12

2008

$32

$15

 

 

   38.   Refer to Table 24-3.  If 2007 is the base year, then the consumer price index was

a.

200 in 2006, 100 in 2007, and 114.8 in 2008.

c.

74.1 in 2006, 270 in 2007, and 310 in 2008.

b.

74.1 in 2006, 100 in 2007, and 114.8 in 2008.

d.

200 in 2006, 270 in 2007, and 310 in 2008.

 

 

   39.   Suppose the money supply decreased by 3%, velocity increased by 1%, and inflation increased by 4%, what must have been real GDP growth?

a.

-1%

c.

-6%

b.

0%

d.

2%

 

 

Table 28-3

 

2003 Labor Data for Adults (age 16 and older) in Meditor

 

Males not in labor force

45 million

Females not in labor force

35 million

Males unemployed

5 million

Females unemployed

5 million

Males employed

85 million

Females employed

65 million

 

 

   40.   Refer to Table 28-3.  What is the adult male unemployment rate in Meditor?

a.

5.6 percent

c.

5 percent

b.

3.7 percent

d.

5.9 percent

 

 

   41.   What is the lowest interest rate at which you would prefer $100,000 today over $105,000 a year from now?

a.

4%

c.

6%

b.

3%

d.

10%

 

 

Table 24-1

 

The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

 

Year

Price of

Peaches

Price of

Pecans

2005

$11 per bushel

$6 per bushel

2006

$9 per bushel

$10 per bushel

 

 

   42.   Refer to Table 24-1.  If 2005 is the base year, then the CPI for 2005 was

a.

200.

c.

83.3.

b.

100.

d.

120.

 

 

   43.   Demand deposits are included in

a.

M1 and M2.

c.

neither M1 nor M2.

b.

M1 but not M2.

d.

M2 but not M1.

 

 

   44.   Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent.  It follows that

a.

the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

c.

the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 8 percent.

b.

the dollar value of savings increased at 5 percent, and the purchasing power of savings increased at 2 percent.

d.

the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 2 percent.

 

 

   45.   The following table provides nominal exchange rates for the U.S. dollar.

 

Country

Foreign currency/dollar

Dollar/foreign currency

Switzerland (franc)

3

.333

Brazil (real)

2

.5

 

 

Based on these data, the nominal exchange rate equals ____ reals per Swiss franc or equivalently _____ Swiss francs per real. 

a.

.1665, 1.5

c.

.667,1.5

b.

.1665,.667

d.

1.5, .667

 

 

   46.   The inflation rate is the

a.

absolute change in real GDP from one period to another.

c.

absolute change in the price level from one period to another.

b.

percentage change in the price level from one period to another.

d.

percentage change in real GDP from one period to another.

 

 

   47.   In a closed economy, national saving is

a.

usually greater than investment.

c.

always less than investment.

b.

usually less than investment because of the leakage of taxes.

d.

equal to investment.

 

 

   48.   If the reserve ratio for all banks is 20 percent, then $100 of new reserves can generate

a.

$250 of new money in the economy.

c.

$2,000 of new money in the economy.

b.

$500 of new money in the economy.

d.

$60 of new money in the economy.

 

 

   49.   If net exports are negative, then

a.

net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

c.

net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.

b.

net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners.

d.

net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans.

 

 

   50.   In an open economy

a.

savings equals imports

c.

net capital outflow equals saving minus investment

b.

investment equals savings

d.

Y-C-G=Net Exports + Net Capital Outflow

 

 

   51.   The following table contains some production possibilities for an economy for a given month.

 

Sweaters

Gloves

4

300

6

?

8

100

 

If the production possibilities frontier is bowed outward, then “?” could be

a.

200.

c.

250.

b.

100.

d.

150.

 

 

   52.   In the open-economy macroeconomic model, the market for loanable funds equates national saving with

a.

net capital outflow.

c.

the sum of national consumption and government spending.

b.

the sum of domestic investment and net capital outflow.

d.

domestic investment.

 

 

   53.   Which of the following lists two things that both increase the money supply?

a.

the Fed sells bonds and lowers the discount rate

c.

the Fed buys bonds and lowers the discount rate

b.

the Fed buys bonds and raises the discount rate

d.

the Fed sells bonds and raises the discount rate

 

 

   54.   In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?

a.

$510 billion

c.

$735 billion

b.

$1,390 billion

d.

$225 billion

 

 

Table 3-6

 

Assume that Hilda and Carlos can switch between producing quilts and producing dresses at a constant rate.

 

 

Hours Needed

To Make 1

Amount Produced

in 90 Hours

Quilt

Dress

Quilts

Dresses

Hilda

30

10

3

9

Carlos

90

45

1

2

 

 

   55.   Refer to Table 3-6.  Assume that Hilda and Carlos each has 90 hours available.  If each person divides their time equally between the production of quilts and dresses, then total production is

a.

3 quilts and 2 dresses.

c.

4 quilts and 11 dresses.

b.

1 quilt and 9 dresses.

d.

2 quilts and 5.5 dresses.

 

 

   56.   Suppose the Fed decided to keep the quantity of reserves held fixed because it was worried about inflation. If the demand for reserves rises

a.

the Fed would act to keep the supply of reserves perfectly elastic.

c.

the Fed would have to increase the Fed Funds rate.

b.

The Fed would have to decrease the Fed Funds rate.

d.

the Fed would have to decrease the amount of reserves in the system.

 

 

   57.   A Production Possiblities Frontier 

a.

usually exhibits diminishing returns to labor.

c.

is best described as having constant retruns to scale.

b.

shows the various mixes of output an economy can produce given the available resources.

d.

shows the various combinations of capital and labor that can be used to produce one unit of some good.

 

 

   58.   In the open-economy macroeconomic model, the supply of loanable funds comes from

a.

national saving.

c.

net exports

b.

the sum of domestic investment and net capital outflow.

d.

the sum of national saving and net capital outflow.

 

 

   59.   Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks.  Which of the following is not possible?

a.

Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.

c.

Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats.

b.

Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks.

d.

Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks.

 

 

   60.   Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

a.

rose.  The increased saving would increase the quantity of loanable funds demanded.

c.

fell.  The increased saving would increase the quantity of loanable funds demanded.

b.

fell.  The increased saving would increase the quantity of loanable funds supplied.

d.

rose.  The increased saving would increase the quantity of loanable funds supplied.

 

 

Scenario 24-3

 

Grant Gant was a doctor in 1944 and earned $12,000 that year.  His daughter, Gretta Gant, is a doctor today and she earned $210,000 in 2005.  The price index was 17.6 in 1944 and 184 in 2005.

 

   61.   Refer to Scenario 24-3. In real terms, Grant Gant’s income amounts to about what percentage of Gretta Gant’s income?

a.

67.4 percent

c.

9.6 percent

b.

59.7 percent

d.

5.71 percent

 

 

Table 24-4

 

The table below pertains to Wrexington, an economy in which the typical consumer’s basket consists of 20 pounds of meat and 10 toys.

 

Year

Price of

Meat

Price of a

Toy

2004

$3 per pound

$2

2005

$1 per pound

$7

2006

$4 per pound

$5

 

 

   62.   Refer to Table 24-4.  If the base year is 2006, then the CPI

a.

increased from 2004 to 2005 and decreased from 2005 to 2006.

c.

decreased from 2004 to 2005 and decreased from 2005 to 2006.

b.

increased from 2004 to 2005 and increased from 2005 to 2006.

d.

decreased from 2004 to 2005 and increased from 2005 to 2006.

 

 

   63.   Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent.  How many people were employed?

a.

1.5 million

c.

28.5 million

b.

47.5 million

d.

30 million

 

 

   64.   According to the Purchasing Power Parity Theory, if a dollar will buy more in the U.S. than abroad, traders will ________, which will cause the dollar to ________.

a.

buy abroad and sell in the U.S., depreciate

c.

buy in the U.S. and sell abroad, depreciate

b.

buy abroad and sell in the U.S., appreciate

d.

buy in the U.S. and sell abroad, appreciate

 

 

   65.   The VALUE ADDED approach in accounting GDP mentioned during Professor Rupert’s lecture does what:

a.

Adds up C + I + G + NX

c.

None of the above

b.

Adds up all consumer goods including the ones that were imported

d.

Adds up all the goods produced and subtracts the intermediate inputs.

 

 

   66.   Net capital outflow

a.

equals savings.

c.

equals net exports.

b.

equals investment.

d.

is always positive.

 

 

   67.   When the relative price of a good decreases, consumers respond by buying

a.

a smaller quantity of that good and a smaller quantity of substitutes for that good.

c.

a larger quantity of that good and a smaller quantity of substitutes for that good.

b.

a smaller quantity of that good and a larger quantity of substitutes for that good.

d.

a larger quantity of that good and a larger quantity of substitutes for that good.

 

 

   68.   An economy’s production possibilities frontier is also its consumption possibilities frontier

a.

when the economy is self-sufficient.

c.

under all circumstances.

b.

when the rate of tradeoff between the two goods being produced is constant.

d.

under no circumstances.

 

 

   69.   An increase in the price of dairy products produced domestically will be reflected in

a.

neither the GDP deflator nor the consumer price index.

c.

the GDP deflator but not in the consumer price index.

b.

both the GDP deflator and the consumer price index.

d.

the consumer price index but not in the GDP deflator.

 

 

   70.   Suppose that banks desire to hold no excess reserves, the reserve requirement is 5 percent, and a bank receives a new deposit of $1,000. This bank

a.

will increase its required reserves by $50.

c.

will be able to make a new loan of $950.

b.

will initially see its total reserves increase by $1,000.

d.

All of the above are correct.

 

 

   71.   Suppose that Congress were to repeal (repeal means to get rid of) an investment tax credit. What would happen in the market for loanable funds?

a.

The supply of loanable funds would shift right.

c.

The demand for loanable funds would shift left.

b.

The demand and supply of loanable funds would shift right.

d.

The demand and supply of loanable funds would shift left.

 

 

   72.   If M = 3,000, P = 2, and Y = 12,000, what is velocity?

a.

2

c.

8

b.

4

d.

1/2

 

 

   73.   Suppose the price level rises, but the number of dollars you are paid per hour stays the same.  This means that your

a.

real wage is higher.

c.

real wage is lower.

b.

nominal wage is lower.

d.

nominal wage is higher.

 

 

   74.   The real interest rate tells you

a.

how fast the purchasing power of your bank account rises over time.

c.

how fast the number of dollars in your bank account rises over time.

b.

the purchasing power of your bank account today.

d.

the number of dollars in your bank account today.

 

 

   75.   Suppose the GDP structure for a certain country looks like the table below. Calculate the GDP deflator for 2009 first and then you will be able to answer the question below.

 

                    N. GDP       Real GDP(base 2009)                GDP deflator

2008                 500                500                                           100

2009                 650                550

 

What is the approximate inflation rate from 2008 to 2009?

a.

12%

c.

50%

b.

18%

d.

10%

 

 

   76.   If the exchange rate moves from 110 Japanese yen per euro to 100 Japanese yen per euro, then the Japanese yen has _____ and the euro has _____. 

a.

depreciated; depreciated

c.

depreciated; appreciated

b.

appreciated; depreciated

d.

appreciated; appreciated

 

 

   77.   The key determinant of a the standard of living in a country is

a.

its growth rate of real GDP.

c.

the total amount of goods and services produced within the country.

b.

the total amount of its physical capital.

d.

the amount of goods and services produced from each hour of a worker's time.

 

 

   78.   A country produces only sodas, beer and pizza. The following are the data on prices and quantities the years 2000 and 2001.

 

Sodas

Beer

Pizzas

 

Quantity

Price

Quantity

Price

Quantity

Price

2000

100

$5

300

$20

100

$20

2001

125

$7

250

$20

110

$20

 

Which of the following is true?:

a.

Using 2000 as the base year,  Real GDP for 2001 is $7825

c.

Real GDP increased from 2000 to 2001

b.

Using 2001 as the base year, Real GDP for 2001 is $8500

d.

Using 2001 as the base year,  Real GDP for 2000 is $8500

 

 

   79.   A production possibilities frontier is bowed outward when

a.

the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good.

c.

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

b.

an economy is self-sufficient instead of interdependent and engaged in trade.

d.

the rate of tradeoff between the two goods being produced is constant.

 

 

   80.   Piper is offered a job in Seattle that pays $50,000 and a job in Boston that pays $60,000. Which pair of CPIs would make the two salaries have the same purchasing power?

a.

100 in Seattle and 124.5 in Boston

c.

100 in Seattle and 140 in Boston

b.

125 in Seattle and 150 in Boston

d.

80 in Seattle and 100 in Boston

 

 

                     

 

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