Exam 2: The Measurement and Structure of the National Economy

You took out a loan one year ago at a nominal interest rate of 7.5%.The CPI stood at 173.2 at the time and you expected it to rise to 178.6 over the year.Today the CPI is actually 179.5.Calculate the expected real interest rate on the loan and the real interest rate on the loan.

By how much does the CPI overstate true increases in the cost of living,according to the Boskin Commission? What are the main reasons for this bias in the CPI? What are the economic implications of the bias?

The three approaches to measuring economic activity are the

Which of the following is not a category of consumption spending in the national income accounts?

The Compagnie Naturelle sells mounted butterflies,using butterfly bait it buys from another firm for $20,000.It pays its workers $35,000,pays $1,000 in taxes,and has profits of $3,000.What is its value added?

To what extent are homemaking and child-rearing accounted for in the government's GDP accounts?

If a local government collects taxes of $500,000,has $350,000 of government consumption expenditures,makes transfer payments of $100,000,and has no interest payments or investment,its budget would

Two years ago,the GDP deflator for Old York was 300,and today it is 330.75.Based on this information the annual average inflation rate for the two years was

Nominal personal consumption expenditures in the United States were $1760.4 billion in 1980 and rose to $3839.3 billion in 1990.The price index for personal consumption expenditures was 58.5 for 1980 and 92.9 for 1990,where 1992 was the base year.Calculate the percent change in real personal consumption expenditures (rounded to the nearest percentage point)in the decade.

If a local government collects taxes of $250,000,has $175,000 of government consumption expenditures,makes transfer payments of $75,000,and has no interest payments or investment,its budget would

Private saving is defined as

The value of a household's assets minus the value of its liabilities is called

Monica grows coconuts and catches fish.Last year she harvested 1500 coconuts and 600 fish.She values one fish as having a worth of three coconuts.She gave Rachel 300 coconuts and 100 fish for helping her to harvest coconuts and catch fish,all of which were consumed by Rachel.In terms of fish,Monica's income would equal

In 2008,inflation exceeded expected inflation.In 2009,expected inflation exceeded inflation.Therefore the real interest rate was ________ than the expected real interest rate in 2008 and the real interest rate was ________ than the expected real interest rate in 2009.

The accounting framework used in measuring current economic activity is called

The Fed prefers to focus on inflation based on which price index?

Describe the three different approaches to measuring the amount of economic activity that occurs during a period of time and explain why they all give identical measurements.

The Federal Reserve focuses on the inflation rate based on the ________ rather than the CPI; to measure the underlying trend in inflation,it focuses on the ________.

Private disposable income equals

The value added of a producer is the