Question

17. The real GDP growth between 2017 and 2018 was _____. A. 5.93% B. 6.16% C. 6.57% D. None of the above/not enough information

18. Using 2018 as the base year, the GDP deflator in 2017 was _____. A. 95.73 B. 100 C. 104.46 D. None of the above/not enough information

19. Using 2018 as the base year, the GDP deflator in 2018 was _____. A. 95.73 B. 100 C. 104.46 D. None of the above/not enough information

20. A market basket: A. is a tool devised to track how changing prices affect consumers. B. includes all the goods and services produced in an economy. C. includes all the goods and services consumed in an economy, including imports. D. includes all the goods and services consumed in an economy, including net exports.  

21. A price index: A. measures how much the cost of a market basket has risen or fallen relative to the cost in a base time period. B. summarizes the changes in the cost of living for only rural consumers. C. allows us to see clearly the changes in the cost of a market basket daily. D. is generally only used with consumer goods and services

22. When the CPI increases from one year to the next: A. the cost of living has decreaseD. B. deflation has occurreD. C. people need to spend more money to buy the same amount of goods as the previous year. D. All of these statements are true.

23. When deflation occurs, the purchasing power of money increases. A. True B. False C. Uncertain Consider the following information regarding the CPI for an economy: Year CPI 2000 150 2001 159 2002 181 2003 184

24. The inflation rate between 2000 and 2001 was: A. 5.66% B. 6.00% C. 9.00% D. none of the above

25. In this economy, deflation: A. occurred between 2000 and 2001. B. occurred between 2001 and 2002. C. occurred between 2002 and 2003. D. did not occur between any of the time periods stated above.

26. In 2005, the minimum wage was $5.15 and the CPI in 2005 was 195.3. The CPI in 2018 was 250.5. Thus, the real minimum wage in 2018 dollars was _____. A. $4.02 B. $6.61 C. $12.90 D. None of the above/not enough information  

27. In 2018, the minimum wage was $7.25. Which of the following statements are correct? A. The purchasing power of the minimum wage has increased since 2005. B. The purchasing power of the minimum wage has decreased since 2005. C. The purchasing power of the minimum wage has not changed since 2005. D. One cannot say whether the purchasing power of the minimum wage has increased or decreased since 2005.

Answer 1

17. D None of the above/ not enough information.
Reason; The GDP figures for 2017 and 2018 are not given without which real GDP growth can't be calculated.
18. D. none of the above/ not enough information.
19. D none of the above/ not enough information.
Reason: The formula for GDP deflator = Nominal GDP divided by real GDP * 100. The values for GDP is not given.
20. A. is a tool devised to track how changing prices affect consumers.
Reason: A market basket refers to the mix of goods and services whose prices are tracked and analysed in the economy in order to know inflation and how it affects the consumers.
21. A. measures how much the cost of market basket has fallen or relative to the cost in a base period.
Reason: A price index is the measure of inflation which track the changing cost of market basket by analysing the current period keeping a base year.
22. C. people need to spend more money to buy the same amount of goods as the previous year.
Reason: This signify inflation level i.e, increase in the cost of living such that the same amount of money requires more dollars to be spent than previous year.
23. True.
Reason: deflation refers to the sustained decline in price level. This increases purchasing power of the consumers because now less amount of dollars are needed to buy same amount of goods and services.