Question

i. if the typical market basket of goods and services cost $400 in 1995, and the price index (base year 1992 )for 1995 is 120, then if this same typical bundle cost $420 in 1996, the price index in 1996 would be:

a.120

b.between 120 and 125

c.125

d.above 125

ii.supposez the non-institutionalized population over age 15 is 20 million, 10 million of whome are female, the labour force is 16 million, 6 million of whome are female, and the number of people employed is 15 million, 5.5 million of whome are female. the female participation rate is:

a. 10/20

b. 6/16

c. 5.5/15

d. 6/10

iii.consider an economy in which the current level of income is $700b, the multiplier is 3, the marginal tax rate is 20%, and the current budget deficit is $20b. suppose the government increases the spending to increase GDP to $715b, the budget dificit becomes:

a. less than or equal to $20b

b. more than $20b but not more than $23b

c. more than $23b but not more than $26b

d. more than $26b

Answer 1

Question 1

Cost of market basket in 1995 = $400

Price index in 1995 = 120

Cost of market basket in 1996 = $420

In order to calculate the price index in 1996, we have to calculate the value of market basket for 1996 in terms of 1995 prices.

Following is the required equation -

Cost of market basket in 1995 = Cost of market basket in 1996 * (Price index in 1995/Price index in 1996)

$400 = $420 * (120/Price index in 1996)

Price index in 1996 = ($420 * 120)/$400 = 126

So, the price index in 1996 would be above 125.

The correct answer is the option (d).

Question 2

Laboe force participation rate is calculated as follows -

Labor force participation rate = Labor force/Non-institutionalized population over age 15

In similar sense, Female participation rate is calculated as follows -

Female participation rate = Female labor force/Female non-institutionalized population over age 15

Female participation rate = 6 million/10 million = 6/10

The female participation rate is 6/10.

Hence, the correct answer is the option (d).