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ECO 202 FINAL EXAM: QUESTIONS AND ANSWERS
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ECO 202 FINAL EXAM: QUESTIONS AND ANSWERS
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ECO 202 FINAL EXAM: QUESTIONS AND ANSWERSGDP Deflator Right Ans - (nominal GDP)/(real GDP) x100
Inflation Right Ans - (GDP in year 2- GDP in year 1)/ (GDP in year 1) x100
Consumer Price Index Right Ans - (price of basket of goods and services in
current year)/ (price of basket of goods and services in base year) x100
Amount today Right Ans - amount in previous year x (CPI today/CPI in
previous year)
When new goods are introduced, consumers have more variety from which to
choose. As a result, each dollar is worth __________________ and the cost of living
_______________________. Right Ans - MORE, decreases
Sam goes to grocery to make a monthly purchase of ginger ale. This month,
the price of ginger ale has increase 15%, so she buys peppermint tea instead.
To which problem in the construction of the CPI is the situation most
relevant? Right Ans - Substitution bias
A decrease in the price of domestically produced nuclear reactors will be
reflected in... Right Ans - The GDP deflator but not the CPI
If the price of Italian shoes imported into the US increases, then... Right Ans
- The CPI will increase but the GDP deflator will not increase
If the nominal interest rate is 5% and the rate of inflation is 3%, then the real
interest rate is equal to: Right Ans - 2%
Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of
10%. During that year, the price level increased 15%. Ms. Lane's repayment
will give the bank (more or less?) purchasing power than it originally loaned
her. Right Ans - less
, The cost of changing price tags and price listings are known as: Right Ans -
menu costs
The nominal interest rate is 4%, the inflation rate is 1% and the tax is 20%.
Given US tax laws, how is after-tax real return computed? Right Ans - 0.4(1
- .20)- .01
A macroeconomist-as opposed to a microeconomics- would study Right
Ans - the effects of borrowing by the federal government
An economic model can be accurately described as Right Ans - a
simplification of reality
Changes in real GDP reflect Right Ans - only changes in the amounts being
produced
Nominal Right Ans - real + inflation
Consider Stella's decision to go to college. If she goes to college, she will spend
$20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she
does not go to college, she will earn $18,000 working in a store and spend
$8,000 on room and board. Mandy's cost of going to college is: Right Ans -
$42,000
Sam has $120 to spend and wants either a heart rate monitor or new running
shoes. Both the heart rate monitor and running shoes cost $120, so he can
only buy one. This illustrates that: Right Ans - People face trade offs
Suppose that you receive $300 as a birthday gift. You can spend it today or
you can put the money in a bank account for a year and earn 5% interest. The
opportunity cost of spending the money today, in terms of what you could
have after 1 year is... Right Ans - $315
For which of the following individuals would the opportunity cost of going to
college be the highest? Right Ans - a famous, highly-paid actor who wants
to take time away from show business to finish college and earn a degree
In the former Soviet Union, producers were paid for meeting output targets,
not for selling products. Under those circumstances, where were the economic
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