Question

ΤΕΧΝΙΤΗΤΗ iple Choice y the choice that best completes the statement or answers the question. The production possibilities frontier is a graph that shows the various combinations of output that an economy a. should produce. b. wants to produce. c. can produce d. demands 2 The price index was 320 in one year and 360 in the next year. What was the inflation rate? a. 9 percent ((B-A)/A)*100 b. 11.1 percent c. 12.5 percent ((360 - 320)/320)*100 d. 40 percent 3. GDP excludes most items that are produced and sold illegally and most items that are produced and consume at home because a the quality of these items is not high enough to contribute value to GDP. b. measuring them is so difficult. c. the government wants to discourage the production and consumption of these items. d. these items are not reported on income tax forms. 4. Ethel purchased a bag of groceries in 1970 for $8. She purchased the same bag of groceries in 2006 for $25 If the price index was 38.8 in 1970 and the price index was 180 in 2006, then what is the price of the 1970 bag of groceries in 2006 dollars? a $5.39 b. $25.00 c. $29.11 d. $37.11 5. An economic outcome is said to be efficient if the economy is a. using all of the scarce resources it has available. b. conserving on resources, rather than using all available resources. c. getting all it can get from the scarce resources it has available. d. able to produce more than what is currently being produced without additional resources. 6. Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 fo brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house? a. The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP. b. The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP. c. The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000. d. The 2006 sale affected neither 2005 GDP nor 2006 GDP. 7. Which of the following is not a characteristic of a perfectly competitive market? a. Sellers set the price of the product. b. There are many sellers. c. Buyers must accept the price the market determines. d. All of the above are characteristics of a perfectly competitive market.

Answer 1

Q1. B

The production possibility frontier is a graph that represents the various combinations of output that an economy can produce. PPF demonstrates that to increase the production of one commodity, production of the other has to be decreased as resources are finite.

Q2. C

P0 : 320

P1 : 360

Inflation rate = Change in price / Initial Price * 100

= 40*100/320

= 12.5%

Q3. B

GDP calculation excludes the products which are sold illegally or are produced and consumed at home i.e. they are not part of the marketplace. this is because of vagueness and complexity in calculating the price of these goods.