Macro 5

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12-3-8 10:54
HW5: Summary
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1. If the nominal wage is $30 in 2009 and the CPI is 202 in 2009, then the real wage in 1982-1984 dollars is $__________. 14.85
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2. Efficiency wages are ________________. A. mandated by law B. set below the equilibrium level of the real wage C. offered by firms who want to reduce turnover in the labor force D. special wages offered to teenagers
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3. If the prices of the goods and services contained in the CPI market basket increase from the base period to the next year, we know that ________________. A. the inflation rate is negative B. the next year's CPI will be above 100 C. the next year's CPI will be below 100 D. the inflation rate is zero
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Student Assignment
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4. In 2008, Annie, an 80-year-old, is telling her granddaughter Susie about the good old days. Annie says that in 1938, you could buy a nice house for $15,000 and a jacket for $5. Susie says that today such a house costs $220,000 and such a jacket costs $70. The CPI in 1938 was 14.1 and in 2008 it was 215.3. The real price of a nice house in 1938 using 2008's dollars is $____________. 229042.6
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5. If the real interest rate is 5 percent when the inflation rate is 4 percent, the nominal interest rate is _________ percent. 9
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6. A minimum wage rate that is set ________ the equilibrium real wage rate creates a ________ of labor. A. above; surplus B. above; shortage C. below; surplus D. below; shortage
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7. When comparing the annual inflation rate in the United States based on the CPI with the annual inflation rate based on the PCE price index, the data show that the __________________.
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Student Assignment
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A. CPI measure tends to exceed the PCE price index measure B. PCE price index measure tends to exceed the CPI measure C. CPI measure and the PCE price index measure are equal D. CPI measure and PCE price index measure move in opposite directions
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8. The Consumer Price Index (CPI) measures the ___________________. A. prices paid by consumers for a fixed market basket of consumer goods and services B. quantities of a fixed market basket of goods produced by businesses C. prices paid by all businesses for a fixed market basket of production resources D. prices paid by consumers for a variant market basket of consumer goods and services
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9. The reference base period that the BLS uses to measure the CPI is __________. A. 1982-1984 B. 1993-1995 C. 1998-2000 D. 2002-2004
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10.
Student Assignment
12-3-8 10:54
The people on Coral Island buy only juice and cloth. The CPI market basket contains the quantities bought in 2009. The average household spent $60 on juice and $30 on cloth in 2009 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2010, juice is $4 a bottle and cloth is $6 a yard. The CPI in 2010 is ___________. 173.3
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11. If the GDP price index is 125 and nominal GDP is $130 billion, then real GDP equals $________ billion. (Your answer should be only a number. Don't add $ or billion) 104
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12. Because the CPI overstates inflation, _______________________. A. when wages are linked to the CPI, workers' wages become too low as time passes B. as time passes, government payments are increasingly lower than intended C. as time passes, government outlays are increased by more than necessary to compensate for inflation D. workers do not receive adequate compensation for price changes
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13. If in Switzerland in January, 2009 the CPI was 187.4 and in January, 2010 it was 191.1, then the inflation rate in 2010 was _____________. A. unknown without the base period index number B. unknown without the real prices
Student Assignment
12-3-8 10:54
B. unknown without the real prices C. 1.9% D. 3.7%
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14. If the economy is fully employed, which of the following is true? A. The CPI is 100 B. Real and nominal GDP are equal C. Real and potential GDP are equal D. The unemployment rate is zero
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15. The ________ describes the relationship between the amount of labor employed and real GDP. A. production function B. production possibilities frontier C. demand of labor D. supply of labor
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16. The value of the CPI for the reference base period is always _______. A. 1 B. 20
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Student Assignment
12-3-8 10:54
C. 100 D. 220
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17. An example of the outlet substitution bias in the calculation of the CPI is a price increase in __________. A. GPS units versus AAA map books B. olive oil versus vegetable oil C. textbooks bought through the campus bookstore relative to textbooks via Craigslist D. a trip to Mexico for a couple that had previously taken vacations in Europe
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18. The inflation rate is the ___________________. A. percentage change in the CPI from one year to the next year B. difference between the current period CPI and the base period CPI C. difference between the base period CPI and the current period CPI D. difference in the price level from one year to the next year
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19. If the cost of the CPI market basket at current period prices is $1000 and the cost of the CPI market basket at base period prices is $250, the CPI is ______. A. 4 B. 100
Student Assignment
12-3-8 10:54
B. 100 C. 250 D. 400
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20. An example of the quality change bias in the calculation of the CPI is a price increase in _________________. A. Coke versus Pepsi B. DVDs purchased on Craigslist, a online classified website C. a 2011 GPS unit versus a 2008 GPS unit D. pants purchased by a first-time shopper at J-crew
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Macro 5

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B. unknown without the real prices C. 1.9% D. 3.7%

B. 100 C. 250 D. 400

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