Suppose that 1990 is the base year used to calculate the CPI. And the CPI in the

Question

Suppose that 1990 is the base year used to calculate the CPI. And the CPI in the year 2000 is 110. How much of A C.O.L.A. adjustment will you receive?

a. a 10% increae in the nominal wage

b. a 10% increase in the real wage

c. a 10% decrease in the nominal wage

d. no wage change

Exports __________GDP and imports___________GDP.

a. increase, decrease

b. decrease, increase

c. increae, increae,

d. decrease, decrease

Economists say that the economy is a "full employemnt" when the:

a. structural unemployment rate is zero.

b. total umployment rate is zero

c. fricitonal unemployment rate is zero.

d. natural unemployment rate is zero/

e. None of the above

Suppose that 2000 is the base year used to calculate the CPI. And ethe CPI in the year 2007 is 110. What is the value of the CPI in 2000?

a. 100

b. 110

c. 10%

d.none of the abov

Tarriffs are more favorable to an importing country than quotas because:

a. Tariffs help the importing country through increased taxation revenue

b. Import quotas do not transfer any extra revenues to the exporting country

C. The tax revenue earned from a tariff is transferred to the exporting country

D. None of the above

In order to be defined as unemployment a person must:

a. not have a job

b. not have a job and must have looked for work for some time.

c. not have a job and must be actively looking for work

d. have a job but looking for a different job

e. working less than their desired amount of time

Which of the following best defines the business cycle?

a. a mapping of GDP over time

b. differences in cyclical unemployment

c. expansions and contractions in the economy's GDP

d. all of the above

Explanation / Answer

(1) (a)

Over based period and current period, CPI has increased by 10% (from 100 to 110), so nominal wage should increase by 10% to compensate for the lost purchasing power.

(2) (a)

GDP = C + I + G + X - M

So, X (Exports) increase GDP & M (Imports) reduce GDP.

(3) (e)

Full employment is the natural unemployment rate (> 0) that prevails when the economy is operating at potential GDP, utilizing all its existing factor endowments and resources.

(4) (a)

Base year CPI is always 100.

(5) (a)

The importing country earns tariff revenue which is not available in case of a quota.

(6) (c)

(7) (c)

A business cycle is characterized by growth in output and activity (expansion) and slowing down of growth and output (contraction or recession).

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