ECON 203 Lecture 4: Lecture 4
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1.
Given nominal GDP of $4.2 trillion and a GDP Deflator is 120, we can conclude that real GDP is equal to:
A. | $3 Trillion. | |
B. | $3.5 Trillion. | |
C. | $3.9 Trillion. | |
D. | $5.2 Trillion. |
2.
Say real GDP is $9.2 trillion. If personal consumption is $5.1 trillion, investment is 1.8 trillion, and government purchases are 2.5 trillion, then:
A. | personal consumption is less than exports. | |
B. | exports exceed imports by $0.2 trillion. | |
C. | imports are equal to exports. | |
D. | imports exceed exports by $0.2 trillion. |
3. If nominal output is $4.2 trillion and the GDP Deflator is 5 percent higher than its base year, then real output is:
4. If the CPI in 1979 was 72.6 and it was 82.4 in 1980, then the inflation rate from 1979 to 1980 was?
5. Housing comprises roughly 40% of the market basket in the CPI. If the price of housing rises 15% in one year while the other components in the CPI rise by 10%, the CPI will rise by 12%. True or False?
The US Bureau of Labor Statistics calculates inflation by taking samples of prices for a basket of goods and services a typical consumer would purchase. Each good and service is assigned a weight or percentage of income spent on that product. For example, cakes, cupcakes, and cookies are given a weight of 0.197. This means that about 0.2% of the average household spending is made on these items. Of course, an individual's spending may vary significantly from the hypothetical basket of goods and services. In this assignment, you will review the BLS's Relative importance of components in the Consumer Price Indexes and compare how your household spending measures up to the typical consumer's.
Part I
Consider these specific categories:
Category |
CPI Weight |
Your Budget |
Health Insurance |
0.5 |
|
Jewelry |
0.3 |
|
Household Cleaning Supplies |
0.4 |
|
Gasoline |
4.9 |
|
Food Away from Home |
5.9 |
How closely does your household spending correlate to the typical consumer's? Is it realistic that the typical household spends about as much on health insurance as it does on cleaning supplies? Should the Bureau of Labor Statistics adjust its CPI weights after the new federal health care mandate starts? What might this mandate do to inflation? In an economic contraction, what would you expect to happen to spend in each of these categories, if health insurance is mandated?