The GDP chain price index is a. widely reported in the news.b. broadly based.c. adjusted for government spending.d. a measure of changes in consumer prices.

Which of the following statements is true? a. The inclusion of intermediate goods and services in GDP calculations would underestimate our nation’s production level.b. The expenditures approach sums the compensation of employees, rents, profits, net interest, and non-income expenses for depreciation and indirect business taxes.c. Real GDP has been adjusted for change in the general

Which of the following is a shortcoming of GDP? a. GDP measures nonmarket transactions.b. GDP includes an estimate of illegal transactions.c. GDP includes an estimate of the value of household services.d. None of the answers above are correct.

Which of the following items is included in the calculation of GDP? a. Purchase of 100 shares of Apple stock.b. Purchase of a used car.c. The value of a homemaker’s services.d. Sale of Gulf War military surplus.e. None of the answers above would be included.

The economy is considered to be at full employment when a. the actual rate of unemployment is less than the natural rate.b. the leading economic indicators are unchanged for two consecutive quarters.c. structural unemployment is zero.d. frictional plus structural unemployment is less than the natural rate.e. the rate of cyclical unemployment is zero.

To what does the “GDP gap” refer? a. The difference between real and nominal GDP.b. The difference between this year’s real GDP and last year’s GDP.c. The difference between “full-employment” real GDP and actual real GDP.d. The difference between real GDP in the prior trough and real GDP in a current trough of the business

Consider this statement: “When the price of a good or service rises, the inflation rate rises.” Do you agree or disagree? Explain. Suppose, in the base year, a typical market basket purchased by an urban family cost $250. In Year 1, the same market basket cost $950. What is the consumer price index (CPI) for

What are three criticisms of the CPI?4. Suppose you earned $100,000 in a given year. Calculate your real income, assuming the CPI is200 for this year. Explain how a person’s purchasing power can decline in a given year even though he or she received a salary increase. Who loses from inflation? Who wins from inflation?

Suppose you borrow $100 from a bank at 5 percent interest for one year and the inflation rate that year is 10 percent. Was this loan advantageous to you or to the bank? Suppose the annual nominal rate of interest on a bank certificate of deposit is 12 percent. What would be the effect of

When the inflation rate rises, the purchasing power of nominal income a. remains unchanged.b. decreases.c. increases.d. changes by the inflation rate minus one.