EC-111 EXAM 2 questions with
complete solutions rated A+
Which of the following is correct? - correct answer ✔✔The CPI is better than the GDP deflator
at reflecting the goods and services bought by consumers
What basket of goods and services is used to construct the CPI? - correct answer ✔✔The goods
and services that are typically bought by consumers as determined by government surveys
If Year 1 is the base year and Year 2 is the following year, then the inflation rate in Year 2 equals
- correct answer ✔✔[(CPI in Year 2 − CPI in Year 1)/CPI in Year 1] × 100
If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy
experienced - correct answer ✔✔11.1 percent inflation between Years 1 and 2, and 5 percent
deflation between Years 2 and 3.
Refer to the Table. The cost of the basket - correct answer ✔✔decreased from Year 1 to Year 2
and decreased from Year 2 to Year 3
One of the widely acknowledged problems with using the consumer price index as a measure of
the cost of living is that the CPI - correct answer ✔✔fails to account for the introduction of new
goods.
In the United States, if the price of imported oil rises so that the prices of gasoline and heating
oil rise, then the - correct answer ✔✔consumer price index rises much more than does the GDP
deflator
, The following table lists the per gallon prices of gas and milk for the months of September,
October, and November. Assume that the typical consumer buys 100 gallons of gas and 7 gallons
of milk each month, and that September is the base period.
Refer to the Table. What is the consumer price index for November? - correct answer
✔✔114.27
Nate collected Social Security payments of $220 a month in Year 1. If the price index rose from
90 to 108 between Year 1 and Year 2, then his Social Security payments for Year 2 should have
been - correct answer ✔✔$264.
Which of the following statements is correct about the relationship between the nominal
interest rate and the real interest rate? - correct answer ✔✔The real interest rate is the nominal
interest rate minus the rate of inflation
Given that Sarah's income exceeds her expenditures, Sarah is best described as a - correct
answer ✔✔saver or as a supplier of funds.
Long-term bonds are - correct answer ✔✔riskier than short-term bonds, and so interest rates
on long-term bonds are usually higher than interest rates on short-term bonds.
Assume the bonds below have the same term and principal and that the state or local
government that issues the municipal bond has a good credit rating. Which list has bonds
correctly ordered from the one that pays the highest interest rate to the one that pays the
lowest interest rate? - correct answer ✔✔Corporate bond, U.S. government bond, municipal
bond
In a closed economy, what does the difference between the tax revenue and government
purchases, (T − G), represent? - correct answer ✔✔Public saving
complete solutions rated A+
Which of the following is correct? - correct answer ✔✔The CPI is better than the GDP deflator
at reflecting the goods and services bought by consumers
What basket of goods and services is used to construct the CPI? - correct answer ✔✔The goods
and services that are typically bought by consumers as determined by government surveys
If Year 1 is the base year and Year 2 is the following year, then the inflation rate in Year 2 equals
- correct answer ✔✔[(CPI in Year 2 − CPI in Year 1)/CPI in Year 1] × 100
If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy
experienced - correct answer ✔✔11.1 percent inflation between Years 1 and 2, and 5 percent
deflation between Years 2 and 3.
Refer to the Table. The cost of the basket - correct answer ✔✔decreased from Year 1 to Year 2
and decreased from Year 2 to Year 3
One of the widely acknowledged problems with using the consumer price index as a measure of
the cost of living is that the CPI - correct answer ✔✔fails to account for the introduction of new
goods.
In the United States, if the price of imported oil rises so that the prices of gasoline and heating
oil rise, then the - correct answer ✔✔consumer price index rises much more than does the GDP
deflator
, The following table lists the per gallon prices of gas and milk for the months of September,
October, and November. Assume that the typical consumer buys 100 gallons of gas and 7 gallons
of milk each month, and that September is the base period.
Refer to the Table. What is the consumer price index for November? - correct answer
✔✔114.27
Nate collected Social Security payments of $220 a month in Year 1. If the price index rose from
90 to 108 between Year 1 and Year 2, then his Social Security payments for Year 2 should have
been - correct answer ✔✔$264.
Which of the following statements is correct about the relationship between the nominal
interest rate and the real interest rate? - correct answer ✔✔The real interest rate is the nominal
interest rate minus the rate of inflation
Given that Sarah's income exceeds her expenditures, Sarah is best described as a - correct
answer ✔✔saver or as a supplier of funds.
Long-term bonds are - correct answer ✔✔riskier than short-term bonds, and so interest rates
on long-term bonds are usually higher than interest rates on short-term bonds.
Assume the bonds below have the same term and principal and that the state or local
government that issues the municipal bond has a good credit rating. Which list has bonds
correctly ordered from the one that pays the highest interest rate to the one that pays the
lowest interest rate? - correct answer ✔✔Corporate bond, U.S. government bond, municipal
bond
In a closed economy, what does the difference between the tax revenue and government
purchases, (T − G), represent? - correct answer ✔✔Public saving
