Question 1

What is the impact of the commodity price increase in 2004- 11 on the GDP deflator and the CPI?

Accepted Answer

Given that Australia is a major commodity exporter, the Australian dollar (or the exchange rate) tends to appreciate when commodity prices rise. As the index measure of commodity prices doubled during 2004- 11 and pushed up the exchange rate, this implies that import prices would become cheaper and hence causing a smaller increase in the CPI compared with that in the GDP deflator.

Question 2

Which of the following factors is not believed to affect output in the long run?

Accepted Answer

A)  Monetary policy. 
B)  The stock of capital. 
C)  Technology. 
D)  Education system. 
E)  The saving rate. 
A)  Monetary policy. 
B)  The stock of capital. 
C)  Technology. 
D)  Education system. 
E)  The saving rate. A

Question 3

Assume that 2009 is the base year. Given macroeconomic conditions in Australia over the past several decades, we know that:

Accepted Answer

A)  real GDP is always larger than nominal GDP for the period 1960 to 2008. 
B)  real GDP and nominal GDP would be equal for the entire period. 
C)  real GDP is smaller than nominal GDP from 1998 to 2002. 
D)  real GDP is larger than nominal GDP from 2006 to 2011. 
E)  nominal GDP is always larger than real GDP during the past several decades. 
A)  real GDP is always larger than nominal GDP for the period 1960 to 2008. 
B)  real GDP and nominal GDP would be equal for the entire period. 
C)  real GDP is smaller than nominal GDP from 1998 to 2002. 
D)  real GDP is larger than nominal GDP from 2006 to 2011. 
E)  nominal GDP is always larger than real GDP during the past several decades. A

Question 4

Which of the following expressions represents nominal GDP?

Accepted Answer

A)  $Yt/Pt 
B)  Yt 
C)  PtYt 
D)  Yt + Pt 
E)  Yt/Pt 
A)  $Yt/Pt 
B)  Yt 
C)  PtYt 
D)  Yt + Pt 
E)  Yt/Pt

Question 5

Hedonic pricing is:

Accepted Answer

A)  the process of pricing individual characteristics of a good or service. 
B)  the way that luxury goods are priced in a market economy. 
C)  the tendency for the inflation rate to rise by greater and greater amounts. 
D)  the tendency for nominal GDP to rise when the price level rises. 
E)  the process of translating nominal GDP into real GDP. 
A)  the process of pricing individual characteristics of a good or service. 
B)  the way that luxury goods are priced in a market economy. 
C)  the tendency for the inflation rate to rise by greater and greater amounts. 
D)  the tendency for nominal GDP to rise when the price level rises. 
E)  the process of translating nominal GDP into real GDP.

Question 6

An individual is said to be a discouraged worker if he or she:

Accepted Answer

A)  wants to work, and is actively searching for a job. 
B)  is working in jobs she/he is not suited for. 
C)  is working part time, but would prefer a full time job. 
D)  is working, but prefers not to work. 
E)  wants to work, but has given up searching for a job. 
A)  wants to work, and is actively searching for a job. 
B)  is working in jobs she/he is not suited for. 
C)  is working part time, but would prefer a full time job. 
D)  is working, but prefers not to work. 
E)  wants to work, but has given up searching for a job.

Question 7

By 2011, labour income in Australia accounted for approximately what share of GDP?

Accepted Answer

A)  25%. 
B)  65%. 
C)  35%. 
D)  45%. 
E)  55%. 
A)  25%. 
B)  65%. 
C)  35%. 
D)  45%. 
E)  55%.

Question 8

GDP in current dollars is equivalent to which of the following?

Accepted Answer

A)  GDP in constant dollars. 
B)  GDP in 2009 dollars. 
C)  GDP in terms of goods. 
D)  Real GDP. 
E)  Nominal GDP. 
A)  GDP in constant dollars. 
B)  GDP in 2009 dollars. 
C)  GDP in terms of goods. 
D)  Real GDP. 
E)  Nominal GDP.

Question 9

By 2011, capital income in Australia accounted for approximately what share of GDP?

Accepted Answer

A)  25%. 
B)  45%. 
C)  65%. 
D)  35%. 
E)  55%. 
A)  25%. 
B)  45%. 
C)  65%. 
D)  35%. 
E)  55%.

Question 10

Explain the three ways GDP can be measured.

Accepted Answer

GDP can be measured three ways. First, G

Question 11

The GDP deflator provides a measure of which of the following?

Accepted Answer

A)  Real GDP divided by the aggregate price level. 
B)  The ratio of nominal GDP to real GDP. 
C)  The ratio of GDP to the size of the population. 
D)  The ratio of GDP to the number of workers employed. 
E)  The price of a typical consumer's basket of goods. 
A)  Real GDP divided by the aggregate price level. 
B)  The ratio of nominal GDP to real GDP. 
C)  The ratio of GDP to the size of the population. 
D)  The ratio of GDP to the number of workers employed. 
E)  The price of a typical consumer's basket of goods.

Question 12

Explain how inflation can lead to distortions.

Accepted Answer

First, not all prices and wages adjust a

Question 13

Do the CPI and GDP deflator always move together? Explain.

Accepted Answer

No, they do not. For example, if the pri

Question 14

Consider this current information in Australia: 200 million people are working, 30 million are not working but are looking for work, and 60 million are not working and have given up looking for work. The official unemployment rate for that month is:

Accepted Answer

A)  10.0%. 
B)  30.0%. 
C)  13.0%. 
D)  7.0%. 
E)  26.0%. 
A)  10.0%. 
B)  30.0%. 
C)  13.0%. 
D)  7.0%. 
E)  26.0%.

Question 15

Why are economists interested in unemployment in relation to output?

Accepted Answer

Given that the GDP data is only availabl

Question 16

A deflation refers to a situation where:

Accepted Answer

A)  the inflation rate is increasing at a slower rate. 
B)  both inflation and the unemployment rate are increasing. 
C)  the inflation rate is falling. 
D)  both inflation and the unemployment rate are falling. 
E)  the inflation rate is negative. 
A)  the inflation rate is increasing at a slower rate. 
B)  both inflation and the unemployment rate are increasing. 
C)  the inflation rate is falling. 
D)  both inflation and the unemployment rate are falling. 
E)  the inflation rate is negative.

Question 17

Briefly explain why the reported official unemployment rate in Spain in 1994 may have provided an over- estimate of unemployment in Spain.

Accepted Answer

The relatively high unemployment rate in

Question 18

The prices for which of the following goods are included in both the GDP deflator and the consumer price index?

Accepted Answer

A)  Goods bought by domestic households. 
B)  Goods bought by the foreign government. 
C)  Goods bought by foreign households. 
D)  Goods bought by the domestic government. 
E)  Goods bought by firms. 
A)  Goods bought by domestic households. 
B)  Goods bought by the foreign government. 
C)  Goods bought by foreign households. 
D)  Goods bought by the domestic government. 
E)  Goods bought by firms.

Question 19

If nominal GDP rises from $50 trillion to $58 trillion, while the GDP deflator rises from 3.0 to 3.5, the percentage change in real GDP is:

Accepted Answer

A)  - 10%. 
B)  0%. 
C)  20%. 
D)  10%. 
E)  9.1%. 
A)  - 10%. 
B)  0%. 
C)  20%. 
D)  10%. 
E)  9.1%.

Question 20

Fluctuations refer to:

Accepted Answer

A)  changes in stock prices. 
B)  alternating periods of expansions and recessions. 
C)  changes in bond prices. 
D)  deviations of stock prices from their fundamental values. 
E)  movements in prices. 
A)  changes in stock prices. 
B)  alternating periods of expansions and recessions. 
C)  changes in bond prices. 
D)  deviations of stock prices from their fundamental values. 
E)  movements in prices.

Exam 2: A Tour of the Book

What is the impact of the commodity price increase in 2004- 11 on the GDP deflator and the CPI?

Which of the following factors is not believed to affect output in the long run?

Assume that 2009 is the base year. Given macroeconomic conditions in Australia over the past several decades, we know that:

Which of the following expressions represents nominal GDP?

Hedonic pricing is:

An individual is said to be a discouraged worker if he or she:

By 2011, labour income in Australia accounted for approximately what share of GDP?

GDP in current dollars is equivalent to which of the following?

By 2011, capital income in Australia accounted for approximately what share of GDP?

Explain the three ways GDP can be measured.

The GDP deflator provides a measure of which of the following?

Explain how inflation can lead to distortions.

Do the CPI and GDP deflator always move together? Explain.

Consider this current information in Australia: 200 million people are working, 30 million are not working but are looking for work, and 60 million are not working and have given up looking for work. The official unemployment rate for that month is:

Why are economists interested in unemployment in relation to output?

A deflation refers to a situation where:

Briefly explain why the reported official unemployment rate in Spain in 1994 may have provided an over- estimate of unemployment in Spain.

The prices for which of the following goods are included in both the GDP deflator and the consumer price index?

If nominal GDP rises from $50 trillion to $58 trillion, while the GDP deflator rises from 3.0 to 3.5, the percentage change in real GDP is:

Fluctuations refer to:

A Tour of the World

The Goods Market

Financial Markets

Goods and Financial Markets: the Islm Model

The Labour Market

Putting All Markets Together: the Asad Model

The Phillips Curve, the Natural Rate of Unemployment and Inflation

The Crisis

The Facts of Growth

Saving, Capital Accumulation and Output

Technological Progress and Growth

Technological Progress: the Short, the Medium and the Long Run

Expectations: the Basic Tools

Financial Markets and Expectations

Expectations, Consumption and Investment

Expectations, Output and Policy

Openness in Goods and Financial Markets

The Goods Market

Output, the Interest Rate and the Exchange Rate

Exchange Rate Regimes

Should Policy-Makers Be Restrained

Fiscal Policy: a Summing up

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

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