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Homework 2 Answers Section - Introductory Macroeconomic Analysis | EC 202, Assignments of Economics

University of Oregon (UO)Economics

Material Type: Assignment; Class: Intro Econ Analy Macro >2; Subject: Economics; University: University of Oregon; Term: Unknown 1989;

Typology: Assignments

Pre 2010

Uploaded on 07/29/2009

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koofers-user-6ng 🇺🇸

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ID: A
1
Homework 2
Answer Section
MULTIPLE CHOICE
1. ANS: C DIF: 2 REF: 23-0 TOP: Gross domestic product
MSC: Interpretive
2. ANS: C DIF: 1 REF: 23-1 TOP: Income, Expenditures
MSC: Interpretive
3. ANS: C DIF: 2 REF: 23-2 TOP: Gross domestic product
MSC: Definitional
4. ANS: A DIF: 2 REF: 23-2 TOP: Gross domestic product
MSC: Definitional
5. ANS: D DIF: 2 REF: 23-2 TOP: Gross domestic product
MSC: Applicative
6. ANS: B DIF: 2 REF: 23-2
TOP: Gross domestic product, Intermediate goods MSC: Interpretive
7. ANS: C DIF: 2 REF: 23-2
TOP: Gross domestic product, Gross national product MSC: Applicative
8. ANS: A DIF: 2 REF: 23-2
TOP: Gross domestic product, Gross national product MSC: Definitional
9. ANS: C DIF: 1 REF: 23-3 TOP: Investment
MSC: Definitional
10. ANS: B DIF: 2 REF: 23-3 TOP: Gross domestic product
MSC: Definitional
11. ANS: D DIF: 2 REF: 24-0 TOP: Prices, Standard of living
MSC: Interpretive
12. ANS: B DIF: 2 REF: 24-1 TOP: Consumer price index
MSC: Applicative
13. ANS: A DIF: 2 REF: 24-1 TOP: Inflation rate
MSC: Applicative
14. ANS: B DIF: 2 REF: 24-1 TOP: Consumer price index
MSC: Interpretive
15. ANS: C DIF: 2 REF: 24-2 TOP: Social Security, Indexation
MSC: Interpretive
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ID: A

Homework 2

Answer Section

MULTIPLE CHOICE

  1. ANS: C DIF: 2 REF: 23-0 TOP: Gross domestic product MSC: Interpretive
  2. ANS: C DIF: 1 REF: 23-1 TOP: Income, Expenditures MSC: Interpretive
  3. ANS: C DIF: 2 REF: 23-2 TOP: Gross domestic product MSC: Definitional
  4. ANS: A DIF: 2 REF: 23-2 TOP: Gross domestic product MSC: Definitional
  5. ANS: D DIF: 2 REF: 23-2 TOP: Gross domestic product MSC: Applicative
  6. ANS: B DIF: 2 REF: 23- TOP: Gross domestic product, Intermediate goods MSC: Interpretive
  7. ANS: C DIF: 2 REF: 23- TOP: Gross domestic product, Gross national product MSC: Applicative
  8. ANS: A DIF: 2 REF: 23- TOP: Gross domestic product, Gross national product MSC: Definitional
  9. ANS: C DIF: 1 REF: 23-3 TOP: Investment MSC: Definitional
  10. ANS: B DIF: 2 REF: 23-3 TOP: Gross domestic product MSC: Definitional
  11. ANS: D DIF: 2 REF: 24-0 TOP: Prices, Standard of living MSC: Interpretive
  12. ANS: B DIF: 2 REF: 24-1 TOP: Consumer price index MSC: Applicative
  13. ANS: A DIF: 2 REF: 24-1 TOP: Inflation rate MSC: Applicative
  14. ANS: B DIF: 2 REF: 24-1 TOP: Consumer price index MSC: Interpretive
  15. ANS: C DIF: 2 REF: 24-2 TOP: Social Security, Indexation MSC: Interpretive

ID: A

SHORT ANSWER

16. ANS:

Intermediate goods produced and sold during the year are not included separately as part of GDP because the value of those goods will be included in the value of the final goods produced from them. If the intermediate good is produced but not sold during the year, its value is included as inventory investment for the year in which it was produced. If inventory investment was not included as part of GDP, true production would be underestimated for the year the intermediate good went into inventory, and overestimated for the year the intermediate good is used or sold.

DIF: 2 REF: 23-2 TOP: Intermediate goods, Gross domestic product MSC: Interpretive

  1. ANS: Real income is nominal income adjusted for general increase in prices. If my paycheck is higher this year than last, my nominal income has increased. Whether my real income has increased or not depends on what has happened since last year to the level of prices of things I buy with my income. If the percentage increase in prices is less than the percentage increase in my nominal income, then my real income has increased. Otherwise, my real income has not increased.

DIF: 2 REF: 23-4 TOP: Income MSC: Interpretive

  1. ANS: Using www.bls.gov we know the CPI in 1931 is 15.9 and today the value is 210.0, thus prices have increased by a multiple of 13.2 (210/15.9). Babe Ruth’s salary of $80,000 is equivalent to $1,056,000 dollars, not quite up to Alex Rodriguez’s $27,500,000.
  2. ANS: The AMT is a tax personal income tax implemented in 1970, is was designed to target households with relative high annual incomes (over $100,000) and a lot of deductions. Unfortunately policymakers failed to account for inflation. Since 1970 the CPI has increased from 37.8 to 210. If corrected for inflation the AMT would tax household’s with income over $500,000.