Econ 200, Spring 2012
Suggested Answers to Homework 7
1)
If gross domestic product rises, in percentage terms, ____ the rise in prices, this
indicates ____ real gross domestic product.
a.
less than; an increase in
b.
less than; a decrease in
c.
more than; no change in
d.
less than; no change in
e.
more than; a decrease in
Answer:
2)
a.
b.
c.
d.
e.
b
Each of the following would be included in (American) GDP except
the car you bought from General Motors.
the DVD you bought from Amazon.com.
the flour sold to Pizza Hut.
the CD you bought at the music store.
the car General Motors produced but did not sell.
Answer:
c
3)
One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that
is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store
for $2.00. Taking these three transactions into account, what is the effect on GDP?
a.
GDP increases by $1.50.
b.
GDP increases by $3.50.
c.
GDP increases by $6.00.
d.
GDP increases by $7.50.
Answer:
c
Table 15-2. The information in the table pertains to the country of Ophir.
Year
2004
2005
2006
Nominal GDP
$4000
$4100
$4200
GDP Deflator
100
105
110
4) Refer to Table 15-2. From this information we can conclude that
a.
real GDP was higher in 2006 than in 2005, and real GDP was higher in 2005 than in
2004.
b.
real GDP was higher in 2005 than in 2004, and real GDP was higher in 2005 than in
2006.
c.
real GDP was higher in 2004 than in 2005, and real GDP was higher in 2005 than in
2006.
d.
real GDP was higher in 2004 than in 2006, and real GDP was higher in 2005 than in
2004.
Answer:
a
5)
The unemployment rate is computed as
a.
the number of individuals seeking work divided by the sum of employed individuals
and those seeking work.
b.
the number of individuals seeking work divided by the number of employed
individuals.
c.
the number of employed individuals minus the number of individuals seeking work.
d.
the number of individuals seeking work divided by the total population.
e.
the fraction of those individuals seeking work who fail to find a job in a certain time
period.
Answer:
a
6)
The labor force participation rate is calculated as
a.
the number of individuals seeking work divided by the number employed.
b.
the fraction of the working age population that is employed.
c.
the fraction of the labor force that is seeking work.
d.
the fraction of the working age population that is seeking work.
e.
the fraction of the working age population that is employed or seeking work.
Answer:
e
7)
a.
b.
c.
d.
e.
In the United States, individuals are counted as unemployed if they
are without a job.
do not qualify for unemployment insurance.
are currently seeking work.
have not worked for at least a month.
are of working age and without a job.
Answer:
c
8)
Which of the following measures changes in the prices of goods and services
purchased by the average household?
a.
the GDP deflator
b.
the implicit price deflator
c.
the consumer price index
d.
the producer price index
e.
the household price index
Answer:
c
9)
The total money value of the goods and services produced by the residents of a
country during a specified period, adjusted for changes in prices, is known as
a.
gross national product.
b.
real gross domestic product.
c.
potential gross domestic product.
d.
net domestic product.
e.
gross domestic product.
Answer:
b
10)
If nominal gross domestic product (GDP) has increased by 6.2 percent and the price
index has increased from 123.5 to 128.5, real GDP has increased by approximately
a.
1.2 percent.
b.
2.2 percent.
c.
3.2 percent.
d.
4.2 percent.
e.
5.2 percent.
Answer:
11)
a.
b.
c.
d.
e.
a
The inflation rate is positive if
more prices increase than decrease.
there is an increase in the general level of prices.
there is a change in relative prices.
price increases are larger than price decreases.
all prices increase.
Answer:
b
Short answer questions
Problem 1
(i)
Nominal GDP_2004 = 4x50+2x200 = 600
Real GDP_2004 = 6x50+1x200 = 500
GDP Deflator_2004 = 100x(Nominal GDP_2004/Real GDP_2004) = 100x(600/500)
=120
(ii)
Cost_2004 = 4x5+2x2 = 24
Cost_2005 = 2x5+7x2 = 24
Cost_2006 = 6x5+1x2 = 32
CPI_2004 = 100x(Cost_2004/Cost_2006) = 75
(iii)
d
(iv)
CPI_2005 = 100x(Cost_2005/Cost_2006) = 75
Inflation_2005 = 0 %
Problem 2
The labor force consists of the number of employed (142) plus the number of unemployed (7,5),
which equals 149,5.
To find the labor-force participation rate, we need to know the size of the adult population. Adding
the labor force (149,5) to the number of people not in the labor force (76,5) gives the adult
population of 226. The labor-force participation rate is the labor force (149,5) divided by the adult
population (226) times 100%, which equals 66%.
The unemployment rate is the number of unemployed (7,5) divided by the labor force (149,5)
times 100%, which equals 5.0%.