Question

5) The Consumer Price Index is a measure of the

a.	cost of a market basket of consumer goods and services relative to its cost in some base year

b. change in the average price of a market basket of "necessary" goods and services

c. annual inflation rate in the producers' goods market

d. change in the average price level of all final goods and services

e. average price of all goods and services relative to their price last year

6) If currently illegal drugs are made legal, GDP will increase.

a. True

b. False

7) Net exports is the value of

a. exports minus the value of imports

b. imports minus the value of exports

c. imports minus tariffs

d. exports minus tariffs

e. exports plus the value of imports minus depreciation

Answer 1

5) CPI= (Cost of CPI market basket at current period prices ÷ Cost of CPI market basket at base period prices) × 100. The Consumer Price Index is thus a measure of the cost of a market basket of consumer goods and services relative to its cost in some base year. The answer is option (a).

6) The statement is true. If currently illegal drugs are made legal, GDP will increase. Illegal activities are not included in GDP accounting, so if they are made legal it will be included in GDP and GDP will increase. The answer is option (a).

7) Net exports= Exports - Imports. Net exports is the value of exports minus the value of imports. Hence the answer is option (a).