Cheese

2. If production remains the same and all prices double, then real GDP

Answer

| | and nominal GDP are both constant. |

| | is constant and nominal GDP is reduced by half. |

| | is constant and nominal GDP doubles. |

| | doubles and nominal GDP is constant. |

3. If the GDP price deflator is 2.0 and nominal GDP is $10,000 billion, then real GDP is

Answer

| | $5,000 billion. |

| | $2,000 billion. |

| | $50 billion. |

| | None of the above is correct. |

4. The consumer price index (CPI)

Answer

| | measures the price of a fixed basket of good and services that typical households purchase. |

| | measures the price of a basket of goods and services that constantly changes as the composition of consumer spending changes. |

| | measures the amount of money that it takes to produce a fixed level of utility. |

| | is one of the many statistics in the National Income Accounts |

5. In the national income accounts, all of the following are classified as government purchases except:

Answer

| | payments made to Social Security recipients. |

| | services provided by police officers. |

| | purchases of military hardware. |

| | services provided by U.S. senators. |

6. Your grandparents tell you that in 1960 they paid $0.35 for admission to a movie. The price index in 1960 was 30. The price index today is 171. What is the price your grandparents paid in today’s dollars?

Answer

| | $1.05 |

| | $1.99 |

| | $3.01 |

| | $5.98 |

7. Which of the following is a type of open-market operation?

Answer

| | The government sells Treasury bills to the public. |

| | The government prints money and uses it to buy army |

| | The Fed sells Treasury bills to the public. |

| | The Fed buys foreign currency in the exchange market. |

8. Consider the following table

Year Inflation Rate Nominal Interest Rate

1 5% 10%

2 10% 5%

By how much has the real...