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Macroeconomics Indicators
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1
Question
What does the CPI measure in an economy?
Answer
The average change over time in prices paid by urban consumers for a basket of goods and services.
2
Question
How is the inflation rate calculated from CPI?
Answer
(Current CPI - Previous CPI) / Previous CPI × 100.
3
Question
If CPI rises from 120 to 132, what is the inflation rate?
Answer
10%.
4
Question
Why would consumers buy less gasoline when its price rises more relative to milk?
Answer
Due to relative price changes and budget constraints.
5
Question
What happens to the loanable funds market when government purchases increase?
Answer
Demand for loanable funds increases, raising interest rates and decreasing quantity.
6
Question
In a closed economy, how does increased government spending affect interest rates?
Answer
Increases interest rates by shifting demand curve right.
7
Question
What is nominal GDP?
Answer
The market value of all final goods and services produced in an economy using current prices.
8
Question
How is real GDP calculated?
Answer
Nominal GDP adjusted for price changes using a base year.
9
Question
What is the GDP deflator?
Answer
A measure of price level changes: (Nominal GDP / Real GDP) × 100.
10
Question
If nominal GDP is $400 and real GDP is $500 in base year prices, what is the GDP deflator?
Answer
80.
11
Question
What is the natural rate of unemployment?
Answer
The unemployment rate under normal economic conditions, including frictional and structural.
12
Question
What is frictional unemployment?
Answer
Short-term unemployment due to workers searching for better jobs.
13
Question
What is structural unemployment?
Answer
Unemployment due to mismatch between workers' skills and job requirements.
14
Question
How is GDP contribution from inventory changes calculated?
Answer
Production = Sales + Ending inventory - Beginning inventory.
15
Question
If a firm sells $10 million and inventory decreases from $2 million to $1 million, what is GDP addition?
Answer
$11 million.
16
Question
What is the cost of a fixed basket used in CPI?
Answer
Sum of (quantity × price) for each good in the base year basket.
17
Question
If meat price falls and toy price rises, how might basket cost change?
Answer
Depends on relative price changes weighted by quantities.
18
Question
How do you adjust nominal income for inflation to find real income?
Answer
Real income = Nominal income / (CPI / 100).
19
Question
If salary rises from $75,000 to $95,000 and CPI from 177 to 266, what is real salary change?
Answer
2001 dollars: approximately $63,214, a decrease.
20
Question
What determines the base year for CPI?
Answer
A year chosen to represent typical consumption patterns, often recent.
21
Question
How does an increase in taxes affect national and private saving?
Answer
Increases national saving, decreases private saving if Y, C, G unchanged.
22
Question
What is cyclical unemployment?
Answer
Unemployment due to business cycle downturns.
23
Question
How is real interest rate calculated?
Answer
Nominal interest rate - Inflation rate.
24
Question
If nominal rate is 4.5% and CPI falls from 200 to 190, what is real rate?
Answer
9.5%.
25
Question
What shifts the supply of loanable funds?
Answer
Changes in public saving or private saving incentives.
26
Question
How does increased supply of loanable funds affect interest rates?
Answer
Lowers interest rates, increases national saving.
27
Question
Who is considered unemployed by BLS?
Answer
Persons without job, available for work, actively seeking in last 4 weeks.
28
Question
What affects labor force participation rate?
Answer
Changes in working-age population engagement, like new graduates entering.
29
Question
In circular flow diagram, what do firms sell to households?
Answer
Goods and services.
30
Question
What do households sell to firms?
Answer
Factors of production (labor, capital).