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GDP and Changes in the Price Level Answers

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Producer Price Indexes by Major Commodities (1982 = 100) Commodities 1990 1991 1992 1993 1994 1995 1996 1997 1998 Farm Products 112.2 105.7 103.6 107.1 106.3 107.4 122.4 112.9 104.6 Apparel 117.5 119.6 122.2 123.2 123.5 124.2 125.1 125.7 126.7 Gasoline 78.7 69.9 68.1 63.9 61.7 63.7 72.8 71.9 53.4 Drugs and Pharmaceuticals 170.8 182.6 192.2 200.9 206.0 210.9 214.7 219.1 242.6 Tires 96.2 97.4 98.4 98.3 97.8 99.0 95.4 93.6 92.2 Lumber 124.6 124.9 144.7 183.4 188.4 173.4 179.8 194.5 179.5 Source: U.S. Department of Labor, Bureau of Labor Statistics, Producer Price Indexes, http://stats.bls.gov/. For which commodities in the table was the average price lower in 1998 than it was in 1992?

A
farm products and gasoline
B
drugs and pharmaceuticals and lumber
C
apparel and lumber
D
gasoline and tires
2
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The CPI is a price index that can be defined as:

A
a guide to consumer spending.
B
a statistical series that can be used to measure consumer prices of a market basket of goods over time.
C
an indicator of what firms ought to produce.
D
none of the above.
3

What is the implicit GDP price deflator?

A
a price index that measures price changes in GDP
B
a measure designed to record the effects of inflation on consumers
C
a price index that records the prices businesses receive
D
a method used to calculate current GDP
4

What is deflation?

A
A lack of economic growth.
B
A reduction in the supply of money.
C
A decrease in the general price level.
D
A decrease in a nation’s standard of living.
5

To construct a price index, all of the following are needed EXCEPT

A
a base year.
B
the current inflation rate.
C
a market basket.
D
the price of market basket items.
6

Consumer Price Index of Selected Categories 199920002001*Food164.1167.8172.0Clothing131.3129.6128.5Housing163.9169.6175.2Medical250.6260.8270.9*2001 April IndexSource: Standard & Poor’srce: Standard & Poor’s

A
A
B
B
C
C
D
D
7

If the producer price index goes up:

A
Economic growth has increased.
B
Price paid by producers for factor inputs has gone up.
C
There has been an increase in demand for producers.
D
The money supply has increased but not as much as GDP.
8

According to the graph, from 1970 to 2002 the world’s real GDP growth rate was less than 2% a total of ______________.

Question illustration
A
2 years
B
3 years
C
5 years
D
6 years
9

Which of the following is a price index?

A
GNP
B
Net National Product
C
Implicit GDP Price Deflator
D
PSI
10

Which of the following is the correct way to calculate real GDP?

A
Divide constant GDP by the implicit GDP price deflator and then multiply by 100.
B
Divide current GDP by the implicit GDP price deflator and then multiply by 100.
C
Multiply current GDP by the implicit GDP price deflator.
D
Multiply constant GDP by the implicit GDP price deflator.
11

Economists use price indices to remove _______ from price measurements.

A
costs
B
collateral
C
inflation
D
stagnation
12

An index of average level of prices for all goods and services in the economy is the

A
implicit GDP price deflator.
B
consumer price index.
C
producer price index.
D
current GDP.
13

Please select the word from the list that best fits the definition

A
GDP not adjusted to remove the distortion of inflation
B
price index of about 90,000 items in 364 categories
C
GDP adjusted to remove the distortion of inflation
D
a statistical series that can be used to measure changes in prices over time
E
a representative selection of goods and services
F
index of prices received by domestic producers for their output
14

GDP that has been adjusted to remove inflation is called current GDP.

A
T
B
F
15

The market basket is a year that serves as the basis of comparison in a price index.

A
T
B
F

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