Economics 151 - macroeconomics (topic 6)

Which of the following tells you how fast the purchasing power of your bank account rises over time because of interest paid by the bank?

a)The nominal interest rate.

b)The CPI.

c)The interest rate the bank lists on its website.

d)The real interest rate.

e)Neither the real interest rate nor the nominal interest rate.

d)The real interest rate.

Because the CPI is based on a fixed basket of goods and services, substitution bias causes the index to:

a)Understate the increase in the cost of living from one year to the next.

b)Ignore any increase in the cost of living from one year to the next.

c)Sometimes understate, and sometimes overstate the increase in the cost of living from one year to the next.

d)Overstate the increase in the cost of living from one year to the next.

e)Accurately reflect the increase in the cost of living from one year to the next.

d)Overstate the increase in the cost of living from one year to the next.

Clothes purchased by households:

a)Are included in the investment component of GDP if they are expected to last at least a year.

b)Are included in the government spending component of GDP.

c)Are included in the consumption component of GDP.

d)Are intermediate goods, since workers have to wear clothes.

e)Are included only in net exports, since most are produced in other countries.

c)Are included in the consumption component of GDP.

An increase in the price of caviar imported into New Zealand will be reflected in:

a)The GDP deflator but not the consumer price index.

b)Sometimes the GDP deflator, and sometimes the consumer price index.

c)Neither the GDP deflator nor the consumer price index.

d)Both the GDP deflator and the consumer price index.

e)The consumer price index but not the GDP deflator.

c)Neither the GDP deflator nor the consumer price index.

Suppose that a typical consumer's basket contains 3kg of beef and 2kg of cheese. In 2011 and 2012, the price of beef was $20 per kg. In 2011 the price of cheese was $20 per kg, but in 2012 the price of cheese was $30 per kg. What is the CPI for 2012, if the base year is 2011?

a)1050.

b)1200

c)220

d)1150

e)1000

b)1200

GDP per person is not a perfect measure of the well-being of individuals in society because:

a)It excludes things like the level of crime and environmental quality.

b)It excludes the role of government purchases.

c)It includes things like leisure time.

d)It excludes the value of investment in real capital.

e)It excludes government transfers.

a)It excludes things like the level of crime and environmental quality.

You send a gift of $1000 to your sister in Wellington. When it is received,

a)GDP will only be unaffected if your sister saves the $1000.

b) GDP decreases because the $1000 represents a reduction in your income.

c)GDP is unmeasurable.

d)GDP is unaffected because the $1000 represents a transfer, not a purchase.

e)GDP increases because the $1000 represents an increase in your sister's income.

d)GDP is unaffected because the $1000 represents a transfer, not a purchase.

If a country experiences a significant rise in the prices of the products it produces, while the prices of the products it imports do not change, then:

a)The inflation rate as measured by the GDP deflator will remain unchanged, while the CPI inflation rate will rise.

b)The inflation rate as measured by the GDP deflator will rise by less than the inflation rate as measured by the CPI.

c)The inflation rate as measured by the GDP deflator will rise by more than the inflation rate as measured by the CPI.

d)The inflation rate as measured by the GDP deflator will increase, while the CPI inflation rate will remain unchanged.

e)The inflation rate as measured by both the GDP deflator and the CPI will remain unchanged.

c)The inflation rate as measured by the GDP deflator will rise by more than the inflation rate as measured by the CPI.