ESTUDYR
ECO4223 EXAM 1 UPDATED EXAM WITH MOST TESTED
QUESTIONS AND ANSWERS | GRADED A+ | ASSURED SUCCESS
WITH DETAILED RATIONALES
Which of the following contributes to GDP?
A. Intermediate goods used in production
B. The sales price of homes built thirty years ago
C. Value of all final goods and services
D. Purchases of stocks and bonds
Rationale: GDP measures the market value of newly produced final goods and services within a period,
excluding intermediate goods and financial transactions.
Which statement is true regarding GDP?
A. GDP includes purchases of goods produced in prior years.
B. GDP does not include intermediate goods, which are used to produce other final goods.
C. GDP includes purchases of stocks and bonds.
D. None of the above are true.
Rationale: To avoid double counting, GDP counts only final goods and services created in the current
period.
If the CPI is 120 in 1996 and 180 in 2002, prices have increased by:
A. 80%
B. 60%
C. 120%
D. 50%
Rationale: Inflation = (180–120)/120 = 60/120 = 0.50 = 50%.
What is the inflation rate if the GDP deflator was 112 in 2012 and 117 in 2013?
A. 1.70%
B. 5.00%
C. 4.46%
D. 3.42%
Rationale: Inflation = (117–112)/112 ≈ 0.0446 = 4.46%.
If nominal GDP in 2001 is $18 trillion and real GDP in 1996 prices is $12 trillion, the GDP deflator is:
A. 150
B. 200
C. 100
D. 7
Rationale: Deflator = (Nominal/Real)×100 = (18/12)×100 = 150.
, ESTUDYR
If the price level increases from 200 in year 1 to 220 in year 2, the inflation rate is:
A. 10%
B. 11%
C. 20%
D. 120%
Rationale: (220–200)/200 = 0.10 = 10%.
What is nominal GDP if real GDP is $12 billion and the GDP deflator is 114?
A. $13.68 billion
B. $9.00 billion
C. $12.96 billion
D. $8.48 billion
Rationale: Nominal = (Deflator/100) × Real = 1.14 × 12 = $13.68 billion.
If expected inflation is 15% and a one-year bond yields 10%, the real interest rate is:
A. 5%
B. –5%
C. 7%
D. –8%
Rationale: Real ≈ Nominal – Inflation = 10% – 15% = –5%.
If nominal interest is 2% and expected inflation is –10% (deflation), the real rate is:
A. 8%
B. 12%
C. 10%
D. 2%
Rationale: Real ≈ 2% – (–10%) = 12%.
If expected inflation is 12% and bond yield is 7%, real rate is:
A. –5%
B. –2%
C. 12%
D. –5%
Rationale: 7% – 12% = –5%.
The concept that a dollar paid in the future is less valuable than a dollar today is:
A. Future value
B. Deflation
C. Interest
D. Present value
Rationale: Present value discounts future payments to reflect time preference and opportunity cost.
The price of a coupon bond and its yield to maturity are _____ related: as yield ____ , price ____ .
A. positively; rises; falls
ECO4223 EXAM 1 UPDATED EXAM WITH MOST TESTED
QUESTIONS AND ANSWERS | GRADED A+ | ASSURED SUCCESS
WITH DETAILED RATIONALES
Which of the following contributes to GDP?
A. Intermediate goods used in production
B. The sales price of homes built thirty years ago
C. Value of all final goods and services
D. Purchases of stocks and bonds
Rationale: GDP measures the market value of newly produced final goods and services within a period,
excluding intermediate goods and financial transactions.
Which statement is true regarding GDP?
A. GDP includes purchases of goods produced in prior years.
B. GDP does not include intermediate goods, which are used to produce other final goods.
C. GDP includes purchases of stocks and bonds.
D. None of the above are true.
Rationale: To avoid double counting, GDP counts only final goods and services created in the current
period.
If the CPI is 120 in 1996 and 180 in 2002, prices have increased by:
A. 80%
B. 60%
C. 120%
D. 50%
Rationale: Inflation = (180–120)/120 = 60/120 = 0.50 = 50%.
What is the inflation rate if the GDP deflator was 112 in 2012 and 117 in 2013?
A. 1.70%
B. 5.00%
C. 4.46%
D. 3.42%
Rationale: Inflation = (117–112)/112 ≈ 0.0446 = 4.46%.
If nominal GDP in 2001 is $18 trillion and real GDP in 1996 prices is $12 trillion, the GDP deflator is:
A. 150
B. 200
C. 100
D. 7
Rationale: Deflator = (Nominal/Real)×100 = (18/12)×100 = 150.
, ESTUDYR
If the price level increases from 200 in year 1 to 220 in year 2, the inflation rate is:
A. 10%
B. 11%
C. 20%
D. 120%
Rationale: (220–200)/200 = 0.10 = 10%.
What is nominal GDP if real GDP is $12 billion and the GDP deflator is 114?
A. $13.68 billion
B. $9.00 billion
C. $12.96 billion
D. $8.48 billion
Rationale: Nominal = (Deflator/100) × Real = 1.14 × 12 = $13.68 billion.
If expected inflation is 15% and a one-year bond yields 10%, the real interest rate is:
A. 5%
B. –5%
C. 7%
D. –8%
Rationale: Real ≈ Nominal – Inflation = 10% – 15% = –5%.
If nominal interest is 2% and expected inflation is –10% (deflation), the real rate is:
A. 8%
B. 12%
C. 10%
D. 2%
Rationale: Real ≈ 2% – (–10%) = 12%.
If expected inflation is 12% and bond yield is 7%, real rate is:
A. –5%
B. –2%
C. 12%
D. –5%
Rationale: 7% – 12% = –5%.
The concept that a dollar paid in the future is less valuable than a dollar today is:
A. Future value
B. Deflation
C. Interest
D. Present value
Rationale: Present value discounts future payments to reflect time preference and opportunity cost.
The price of a coupon bond and its yield to maturity are _____ related: as yield ____ , price ____ .
A. positively; rises; falls
