ECON 002 Lecture Notes - Lecture 3: Gdp Deflator, Iphone 5, Iphone 6

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25 Feb 2015

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Econ-002: macro economics lecture 3 inflation part 1. Three approaches: gdp deflator (last lecture), cpi, pced. Consumer price index = a measure of the average change over time in the prices paid by (urban) consumers for a typical market basket of consumer goods and services (i. e. not stocks, or bonds) Three biggest component: housing, transportation, food and beverage. In macro econ class, the question will tell you what the basket and price is. It will also tell you what the base period/ year is. Compute the basket cost (bk) of current year = pbk * qbk. Compute the basket cost of base period. Inflation = 100 * (cpit - cpit-1 )/ cpit-1. Gdpd does not include foreign imported goods. Cpi does not include investment/ capital goods. Their market basket is completely different i. e. tractors. Substitution bias: cpi ignores substitution effect the purchase of substitute goods when price of one changes/ change in income.

Related Questions

This question tests your knowledge of what activities are includedin calculating GDP. Decide for each item whether it is part of GDPand, if so, to which expenditure category it belongs.

2. Purchase of 100 shares of General Motors stock:

A. Not counted in GDP

B. Counted as part of consumption

C. Counted as part of investment

D. Counted as part of government

E. Counted as part of net exports

3. Consider the following three individuals.

Julie did not work for pay last week, but she met with a jobcounselor and went on two job interviews.

Jack was laid off from his job at a furniture store six months ago.He has a family to support and is frustrated with his inability tofind a full-time position. Last week he took a part-time job at afast-food restaurant, but could work only three hours.

Patricia has been out of work for almost a year. She desperatelyneeds a job but has become so discouraged that she has given up onher job search.

Which of these people would be considered unemployed by the Bureauof Labor Statistics (BLS)?

A. Julie

B. Jack

C. Patricia

D. Julie and Jack

E. Julie and Patricia

F. Jack and Patricia

G. All three individuals

H. None of the individuals

4. Which of the following individuals would NOT be consideredunemployed under the Bureau of Labor Statistics criteria?

A. An assembly-line worker for General Motors who is laid offbecause of a reduction in car sales.

B. An assembly-line worker for General Motors who quits her job andreturns to college on a full-time basis.

C. An assembly-line worker for General Motors who quits her job butis interviewing for a position as a part-time bank teller.

D. A recent high-school graduate who is seeking his first job as anassembly-line worker at General Motors.

This table shows employment data for the United States for December2002. The civilian unemployment rate, which is the most commonjobless statistic quoted in the press, only includes non-militaryand non-institutionalized adults 16 years of age and older. Allnumbers are in thousands of people.

Civilian Non-Institutional Population
(16 years of age and over) Employed Unemployed

214,968 133,952 8,590

Source: Economic Report of the President, 2003

5.1. What was the unemployment rate in December 2002? (Express youranswer to the nearest tenth of a percent.)

%
Please enter 1 digit after the decimal point.

This table shows employment data for the United States for December2002. The civilian unemployment rate, which is the most commonjobless statistic quoted in the press, only includes non-militaryand non-institutionalized adults 16 years of age and older. Allnumbers are in thousands of people.

Civilian Non-Institutional Population
(16 years of age and over) Employed Unemployed

214,968 133,952 8,590

Source: Economic Report of the President, 2003

5.2. What was the labor force participation rate in December 2002?(Express your answer to the nearest tenth of a percent.)

%
Please enter 1 digit after the decimal point.

6. The Consumer Price Index measures:

A. The cost of all goods and services produced within a country'sborders

B. The cost of goods and services consumed by a typicalhousehold

C. The change in income received by a typical household

D. The cost of keeping a family above the poverty line

7. Which of the following is NOT a characteristic of discouragedworkers?

A. They want a job.

B. They are not currently working.

C. They are counted as unemployed by the government.

8. If gross investment is $50 billion and depreciation is $20billion, the economy's capital stock rises by:

A. $70 billion

B. $50 billion

C. $30 billion

D. $20 billion

9. The table shows the distribution of total expenditure on the CPImarket basket across several broad categories.
Category of Goods and Services Percent of
Market Basket

Apparel 4%
Education and Communication 6%
Food and Beverages
16%
Housing 41%
Medical Care 6%
Other Goods and Services 4%
Recreation 6%
Transportation 17%

Source: Bureau of Labor Statistics
Which of the following will have the biggest impact on theCPI?

A. A 4% increase in the cost of apparel

B. A 4% increase in the cost of medical care

C. A 4% decrease in the cost of recreation

D. A 4% increase in the cost of food and beverages

. Which of the following activities would be included in thecalculation of GDP for the United States?

A. Texas Instruments produces computer chips at a manufacturingfacility in Indonesia.

B. I chop down a cherry tree on my property and make a dining roomtable. I saw a similar table sell for $800 in a local furniturestore.

C. Honda, a leading Japanese automobile company, produces 25,000Accords at its Indiana plant and exports them back to Japan.

D. Goodyear Tire Company manufactures 250,000 tires. The tires areto be sold to General Motors, which will put them on newautomobiles.

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ECON 002 Lecture Notes - Lecture 3: Gdp Deflator, Iphone 5, Iphone 6

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