Macroeconomics Machine-graded Assessment Items Module: Macroeconomic Measures of Performance


Define the rate of inflation; Explain how the rate of inflation is calculated



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6.7.0.0 Define the rate of inflation; Explain how the rate of inflation is calculated

Short Title: Rate of Inflation
6.7.0.1 If the Consumer Price Index was 186.5 at the end of last year and 179.8 at the end of this year, the country experienced which of the following?

An inflation rate of 3.59 percent.

An inflation rate of 3.72 percent.

A deflation rate of 3.59 percent.*

A deflation rate of 3.72 percent.

// Content page - Reading: Computing the Rate of Inflation


6.7.0.2 If the Consumer Price Index was 120 at the end of last year and 125 at the end of this year, Americans experienced which of the following?

Inflation*

Deflation

A decrease in the purchasing power of a dollar*

A rise in the purchasing power of a dollar

// Content page - Reading: Introduction to Inflation

// Updated 10/29/2015 question and answer choices edited
6.7.0.3 Inflation:

is an increase in the cost of a given basket of goods.*

means that the price of every good and service is rising.

reduces the real value of anything expressed in dollars.*

can occur even when many goods are falling in price.*

// Content page - Reading: Changes in the Cost of Living; Reading: Price Indexes

// Updated 10/29/2015 answer choices edited
6.8.0.0 Identify the consequences of price instability (i.e., inflation)

Short Title: Consequences of Price Instability
6.8.0.1 During the 1970s when inflation accelerated, middle-class Americans benefited primarily because

nominal wages fell.

the value of their mortgage debts decreased in real terms.*

inflation always benefits the middle class.

// Content page - Reading: Why Care About Inflation

// Updated 10/29/2015 answer choices wording improved


Inflation makes certain things less valuable in real terms, including:

anything expressed in dollars.*


real estate and precious metals.

a fixed monthly pension payment.*

your full college scholarship.

// Content page - Reading: The Confusion over Inflation

// Updated 10/29/2015 question and answer choices edited
6.8.0.3 The redistribution of purchasing power due to unexpected inflation benefits:

Elderly persons on pensions with cost-of-living adjustments.

Home buyers with adjustable rate mortgages.

Students with fixed-rate educational loans.*

Lenders.

// Content page - Reading: Why Care About Inflation

// Updated 10/29/2015 answer choices edited
6.8.0.4 Inflation increases uncertainty in the markets because:

sellers raise the prices of their products very gradually and predictably.

consumers must put more effort into shopping to find the best price. *

it is more difficult to stay aware of how one product compares in cost to another.*

// Content page - Reading: Why Care About Inflation; Reading: The Confusion over Inflation

// Updated 10/29/2015 question and answer choices edited


6.9.0.0 Use a price index to translate between real and nominal data

Short Title: Price Indexes and Real Data
6.9.0.1 David’s pay last year was $100,000. His pay this year increased to $115,000. The consumer price index increased from 100 to 115 over the same time period. What has happened to David’s real income from last year to this year?

David’s real income is unchanged. *

David’s real income increased.

David’s real income decreased.

// Content Page – Reading: Computing Real Values Using Price Indexes
6.9.0.2 Kim’s nominal income is $75,000. If the consumer price index is 75, Kim’s real income is

$ 100,000 *

$ 56,250

$ 75,075


// Content page - Reading: Computing Real Values Using Price Indexes
6.9.0.3 Julie received a 10% wage increase while consumer prices rose by 3%. How much did Julie’s real wage increase in nominal and real terms?

10% nominally, but only 3% in real terms

7%*in real terms, but 10% nominally*

13% nominally, but 10% in real terms

3% in real terms, but 10% nominally

// Content page - Reading: Computing Real Values Using Price Indexes

// Updated 10/29/2015 question and answer choices edited
6.10.0.0 Define the GDP price index (also known as the GDP deflator or the Implicit Price Deflator)

Short Title: Defining the GDP Price Index
6.10.0.1 If the nominal GDP is $3 trillion and the GDP deflator is 120, then what is the real GDP?


  • $2.5 trillion*

  • $0.25 trillion

  • $4 trillion

  • $400 trillion

// Content page - Reading: The Implicit Price Deflator
6.10.0.2 Which of the measures below describes a basket of goods comprised of all the components of GDP?

Consumer Price Index

Core CPI

GDP Deflator*

// Content page - Reading: The Implicit Price Deflator

// Updated 10/29/2015 question and answer choices edited


6.10.0.3 The GDP deflator is a price index that includes the following components of GDP:

  • Consumption

  • Consumption plus Investment but not Exports

  • Consumption, Investment plus Exports minus Imports

  • Consumption, Investment, Government plus Exports minus Imports*

// Content page - Reading: How Changes in the Cost of Living Are Measured
Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?

  • $430 billion

  • $835 billion

  • $2,063 billion

  • $2,449 billion*

// Content page - Reading: Price Indexes and the Implicit Price Deflator

// Removed 10/29/2015


In the base year in a small island macroeconomy, nominal GDP was $400m. In a later year when the general level of all prices was twice as high, nominal GDP reached $1000m. Between the base year and the later year:

there was real GDP growth, but by less than 100%.*

there was real GDP growth by more than 100%.

real GDP declined.

inflation occurred.*

// Content Page – Reading: Introduction to Inflation

// New 10/29/2015
6.11.0.0 Differentiate between nominal GDP and real GDP

Short Title: Nominal and Real GDP
Which of the following statements regarding nominal GDP is accurate?

The expenditure approach to GDP includes disposable income.

Nominal GDP presents a dollar amount adjusted for inflation

Nominal GDP is the value of final goods and services produced in an economy at a point in time

// Removed 10/29/2015


Nominal GDP:

is sensitive to changes in prices.*

is sensitive to changes in real output.*

can be meaningfully compared from one year to the next without price level data.

// Content Page - Reading: Real GDP

// New 10/29/2015


6.11.0.1 Which of the following best defines real GDP?

  • Real GDP is defined as the total dollar value of final goods and services produced within a country in one year before adjustment for inflation.

  • Real GDP is defined as the current total dollar value of final goods and services produced within a country.

  • Real GDP is defined as the total dollar value of final goods and services produced within a country in one year after adjustment for inflation.*

// Content page - Reading: Real GDP
6.11.0.2 The distinction between real GDP and nominal GDP is important to determine which of the following?

The change in economic welfare.

The growth in the government sector.

The change in real GDP per person.

The change in real output produced.*

// Content page - Reading: Converting Nominal to Real GDP

// Updated 10/29/2015 answer choices edited
6.11.0.3 The difference between nominal GDP and real GDP is:


  • nominal GDP measures actual productivity

  • nominal GDP adjusts for inflation

  • real GDP adjusts for inflation*

  • real GDP excludes imports and exports

// Content page - Reading: Converting Nominal to Real GDP
6.11.0.4 The following table shows the production within a very small country’s economy in two consecutive years. What was the real GDP for the base year of 2017?

Year

Item

Quantity Produced

Price Per Unit

2017

Oranges

1000 pounds

$1.00

2017

Haircuts

2000 haircuts

$5.00

2018

Oranges

1500 pounds

$1.50

2018

Haircuts

3000 pounds

$7.50

$11,000*

$12,500


$16,500

// Content page - Reading: Converting Nominal to Real GDP

// Updated 10/29/2015 question edited
6.11.0.5 The following table shows the production of a country’s economy in two consecutive years. What was the real GDP for year 2018?

Year

Item

Quantity Produced

Price Per Unit

2017

Oranges

1000 pounds

$1.00

2017

Haircuts

2000 haircuts

$5.00

2018

Oranges

1500 pounds

$1.50

2018

Haircuts

3000 pounds

$7.50

$16,500

$15,000


$23,250*

$22,500


// Content page - Reading: Converting Nominal to Real GDP

// Updated 10/29/2015 question and answer choices edited


The following table shows Tropicalia’s production in two consecutive years. The rate of (real) GDP growth in year 1998 relative to year 1997 is

Year

Item

Quantity Produced

Price Per Unit

1997

Oranges

1000 pounds

$1.00

1997

Haircuts

2000 haircuts

$5.00

1998

Oranges

1500 pounds

$1.50

1998

Haircuts

3000 pounds

$7.00

1. 50%

1. 111%

1. 20%

// Content page - Reading: Converting Nominal to Real GDP

// Removed 10/29/2015
The national debt doubled in nominal terms during a time when the GDP Deflator increased from 200 to 300. This implies that the national debt:

is smaller in real terms.

has increased in real terms, but it has less than doubled.*

has more than doubled in real terms.

// Content Page – Reading: Converting Nominal to Real GDP

// New 10/29/2015


6.11.a.0 Use the GDP price index to compute real GDP from nominal GDP

Short Title: Converting Nominal to Real GDP
6.11.a.1 If Nominal GDP = $4.5 trillion and the GDP deflator is 150, then real GDP is equal to:

$3 trillion.*

$4.3 trillion.

$6 trillion.

// Content page - Reading: Converting Nominal to Real GDP

// Updated 10/29/2015 question and answer choices edited


6.11.a.2 Suppose the European Union has a Real GDP of 12.2 trillion Euros, and their GDP deflator is 125. What is the European Union’s nominal GDP?

1. 15.25 trillion Euros *

1. 9.76 trillion Euros

1. 137.5 trillion Euros

// Content page - Reading: Converting Nominal to Real GDP
6.11.a.3 If Nominal GDP is $17,000 billion and the GDP deflator is 0.75, then Real GDP is:


  • $22.67 billion *

  • $12.75 billion

  • $16.50 billion

// Content page - Reading: Converting Nominal to Real GDP
6.12.0.0 Measure the distribution of income using the Lorenz curve

Short Title: The Lorenz Curve
6.12.0.1 What is the image below?

description: https://s3-us-west-2.amazonaws.com/oerfiles/assessments/economics/gates-outcome-6-lorenz.png

(img: https://s3-us-west-2.amazonaws.com/oerfiles/Assessments/economics/gates-outcome-6-lorenz.png)

  • income curve

  • inequality curve

  • Lorenz Curve*

// Content page - Reading: The Lorenz Curve

// Removed 10/29/2015


6.12.0.2 The image below shows:

description: https://s3-us-west-2.amazonaws.com/oerfiles/assessments/economics/gates-outcome-6-lorenz.png

  • the inequality of the American capitalist system.

  • distribution of income among groups of people.*

  • the impact on unions on wage earners.

// Content page - Reading: The Lorenz Curve

// Removed 10/29/2015


6.12.0.3 A Lorenz curve refers to a graphic illustration of the share of population on the ________ and the cumulative percentage of total income received on the ________.

horizontal axis : vertical axis*

left quintile : right quintile

vertical axis : horizontal axis

// Content page - Reading: The Lorenz Curve
6.12.0.4 Incomes rise for low-income and high-income workers, but rise more for the high-income earners. How will this change affect income inequality?
1. poverty falls, inequality rises*
1. poverty rises, inequality falls
1. no change

// Content page - Reading: The Lorenz Curve

// Removed 10/29/2015
6.12.0.4 When real incomes rise for the rich more rapidly than they rise for those with lower incomes?

Poverty falls but inequality rises.*

Poverty rises but inequality falls.

The Lorenz curve will reflect the change with a greater “bow.”*

The Lorenz curve will reflect the change with a smaller “bow.”

// Content page - Reading: The Lorenz Curve

// New 10/29/2015
6.12.0.5 A Lorenz curve shows:

what percentage of a population has incomes below the poverty line.

how a population’s total income is distributed in relative terms among its members.*

how income mobility has changed over time.

// Content page - Reading: The Lorenz Curve

// Updated 10/29/2015 answer choices edited




October 30, 2015

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