ECO4223 Exam 1: Questions with Complete
Solutions (100% Correct) 2025
Which of the following contributes to GDP?
a. Value of all final goods and services
b. Both A and B
c. The sales price of homes built thirty years ago
d. Intermediate Goods, which are used to produce final goods. - Answer- Value of all final goods and
services.
Which of the following is true regarding GDP?
a. GDP does not include intermediate goods, which are used to produce other final goods.
b. GDP includes the purchases of goods and services that have been produced in the past.
c. GDP includes the purchases of stocks and bonds.
d. None of the above are true. - Answer- GDP does not include intermediate goods, which are used to
produce other final goods.
If the CPI is 120 in 1996 and 180 in 2002, then between 1996 and 2002, prices have increased by
A) 180%.
B) 80%.
C) 60%.
D) 50%. - Answer- 50%
What is the inflation rate if the GDP deflator in 2012 was 112, and the GDP deflator in 2013 was 117?
a. 1.70%
b. 5%
c. 4.46%
d. 3.42% - Answer- 4.46%
,If the nominal GDP in 2001 is $18 trillion, and 2001 real GDP in 1996 prices is $12 trillion, the GDP
deflator price index is:
a. 200
b. 150
c. 100
d. 7 - Answer- 150
If the price level increases from 200 in year 1 to 220 in year 2, the rate of inflation from year 1 to year 2
is:
a. 20%
b. 10%
c. 120%
d. 11% - Answer- 10%
What is nominal GDP in 2010, if real GDP in 2009 was $12 billion, and the GDP deflator is 114?
a. $13.68 billion
b. $9.0 billion
c. $12.96 billion
d. $8.48 billion - Answer- $13.68 billion
If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of
10 percent, then the real interest rate on this bond is:
a. -5 percent
b. 5 percent
c. 7 percent
d. -8 percent - Answer- -5 percent
If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of
interest is:
a. 8 percent
b. 10 percent
, c. 12 percent
d. 2 percent - Answer- 12 percent
If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7
percent, then the real interest rate on this bond is:
a. -5 percent
b. -2 percent
c. 12 percent
d. 2 percent - Answer- -5 percent
The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is
less valuable to you than a dollar today.
a. future value
b. deflation
c. interest
d. present value - Answer- present value
The price of a coupon bond and the yield to maturity are _____ related; that is, as the yield to maturity
________, the price of the bond ___________.
a. positively; rises; falls
b. negatively; falls; falls
c. positively; rises; rises
d. negatively; rises; falls - Answer- negatively; rises; falls
A zero coupon bond payus annual interest and has a future value of $1,000, matures in 4 years and has a
yield to maturity of 6.5%. What is the present value of this bond?
a. $777.32
b. $902.65
c. $1072.33
d. $833.24 - Answer- 777.322
Solutions (100% Correct) 2025
Which of the following contributes to GDP?
a. Value of all final goods and services
b. Both A and B
c. The sales price of homes built thirty years ago
d. Intermediate Goods, which are used to produce final goods. - Answer- Value of all final goods and
services.
Which of the following is true regarding GDP?
a. GDP does not include intermediate goods, which are used to produce other final goods.
b. GDP includes the purchases of goods and services that have been produced in the past.
c. GDP includes the purchases of stocks and bonds.
d. None of the above are true. - Answer- GDP does not include intermediate goods, which are used to
produce other final goods.
If the CPI is 120 in 1996 and 180 in 2002, then between 1996 and 2002, prices have increased by
A) 180%.
B) 80%.
C) 60%.
D) 50%. - Answer- 50%
What is the inflation rate if the GDP deflator in 2012 was 112, and the GDP deflator in 2013 was 117?
a. 1.70%
b. 5%
c. 4.46%
d. 3.42% - Answer- 4.46%
,If the nominal GDP in 2001 is $18 trillion, and 2001 real GDP in 1996 prices is $12 trillion, the GDP
deflator price index is:
a. 200
b. 150
c. 100
d. 7 - Answer- 150
If the price level increases from 200 in year 1 to 220 in year 2, the rate of inflation from year 1 to year 2
is:
a. 20%
b. 10%
c. 120%
d. 11% - Answer- 10%
What is nominal GDP in 2010, if real GDP in 2009 was $12 billion, and the GDP deflator is 114?
a. $13.68 billion
b. $9.0 billion
c. $12.96 billion
d. $8.48 billion - Answer- $13.68 billion
If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of
10 percent, then the real interest rate on this bond is:
a. -5 percent
b. 5 percent
c. 7 percent
d. -8 percent - Answer- -5 percent
If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of
interest is:
a. 8 percent
b. 10 percent
, c. 12 percent
d. 2 percent - Answer- 12 percent
If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7
percent, then the real interest rate on this bond is:
a. -5 percent
b. -2 percent
c. 12 percent
d. 2 percent - Answer- -5 percent
The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is
less valuable to you than a dollar today.
a. future value
b. deflation
c. interest
d. present value - Answer- present value
The price of a coupon bond and the yield to maturity are _____ related; that is, as the yield to maturity
________, the price of the bond ___________.
a. positively; rises; falls
b. negatively; falls; falls
c. positively; rises; rises
d. negatively; rises; falls - Answer- negatively; rises; falls
A zero coupon bond payus annual interest and has a future value of $1,000, matures in 4 years and has a
yield to maturity of 6.5%. What is the present value of this bond?
a. $777.32
b. $902.65
c. $1072.33
d. $833.24 - Answer- 777.322
