ECON 2030 EXAM 2 STERN EXAM
QUESTIONS AND ANSWERS 100% PASS
2026 EDITION
Inflation rate - ANS the percentage increase in the price level from one year to the next and
shows the change in the cost of living
1. GDP deflator
2. CPI (Customer Price Index)
3. PPI (Producer Price Index) - ANS the 3 aggregate price levels used to calculate inflation rate
CPI - ANS an average of the goods and services purchased by a typical urban family of four.
1. Substitution
2. Increase in quality
3. New product
4. Outlet - ANS 4 biases that make the CPI overstate
Substitution bias - ANS as some goods get more expensive, consumers substitute them with
cheaper goods
Increase in quality bias - ANS some increases in prices reflect an increase in quality of goods
and are not just pure inflation
1
@2026 EDITION ALLRIGHTS RESERVED
, New product bias - ANS some new goods (especially electronics) get considerably cheaper
immediately after they're introduced to customers
Outlet bias - ANS internet shopping becomes increasingly popular
Nominal interest rate - ANS the interest rates that banks charge; the stated interest rate on a
loan
Real interest rate - ANS nominal interest rate - inflation rate
Long-run economic growth - ANS an upward trend of real GDP over time
Potential GDP - ANS sometimes, economic growth is called...
Labor productivity - ANS the quantity of goods and services that can be produced by one
worker, or by one hour of work
1. the quantity of capital per hour worked
2. the level of technology - ANS 2 key factors that determine labor productivity
Capital - ANS the manufactured goods that are used to produce other goods and services
Investment - ANS acquisition of capital by firms
Technological change - ANS an increase in the quantity of outputs firms can produce using a
given quantity of inputs
2
@2026 EDITION ALLRIGHTS RESERVED
QUESTIONS AND ANSWERS 100% PASS
2026 EDITION
Inflation rate - ANS the percentage increase in the price level from one year to the next and
shows the change in the cost of living
1. GDP deflator
2. CPI (Customer Price Index)
3. PPI (Producer Price Index) - ANS the 3 aggregate price levels used to calculate inflation rate
CPI - ANS an average of the goods and services purchased by a typical urban family of four.
1. Substitution
2. Increase in quality
3. New product
4. Outlet - ANS 4 biases that make the CPI overstate
Substitution bias - ANS as some goods get more expensive, consumers substitute them with
cheaper goods
Increase in quality bias - ANS some increases in prices reflect an increase in quality of goods
and are not just pure inflation
1
@2026 EDITION ALLRIGHTS RESERVED
, New product bias - ANS some new goods (especially electronics) get considerably cheaper
immediately after they're introduced to customers
Outlet bias - ANS internet shopping becomes increasingly popular
Nominal interest rate - ANS the interest rates that banks charge; the stated interest rate on a
loan
Real interest rate - ANS nominal interest rate - inflation rate
Long-run economic growth - ANS an upward trend of real GDP over time
Potential GDP - ANS sometimes, economic growth is called...
Labor productivity - ANS the quantity of goods and services that can be produced by one
worker, or by one hour of work
1. the quantity of capital per hour worked
2. the level of technology - ANS 2 key factors that determine labor productivity
Capital - ANS the manufactured goods that are used to produce other goods and services
Investment - ANS acquisition of capital by firms
Technological change - ANS an increase in the quantity of outputs firms can produce using a
given quantity of inputs
2
@2026 EDITION ALLRIGHTS RESERVED
