Question

____ 26.   If there is a reduction in the price of large tractors imported into Canada from Russia, what will happen to the GDP deflator and the consumer price index?

a.	The GDP deflator and the consumer price index will decrease.
b.	The GDP deflator will not change; the consumer price index will decrease.
c.	The GDP deflator will decrease; the consumer price index will not change.
d.	Neither the GDP deflator nor the consumer price index will change.

____ 27.   The 2012 CPI was 177 and the 1982 CPI was 96.5. How much would you need in 2012 in order to buy what you were able to buy with the $1000 in 1982?

a.	$1834.20
b.	$1777.77
c.	$1714.81
d.	$960.00

____ 28.   Samantha deposits $2000 into a saving account that pays an annual interest rate of 5 percent. Over the course of a year, the inflation rate is 2 percent. What happens at the end of the year?

a.	Samantha has $100 more in her account, and her purchasing power has increased by about $40.
b.	Samantha has $100 more in her account, and her purchasing power has increased by about $60.
c.	Samantha has $140 more in her account, and her purchasing power has increased about $100.
d.	Samantha has $140 more in her account, and her purchasing power has increased about $40.

____ 29.   Which of the following is the consumer price index used for?

a.	to track changes in the level of wholesale prices in the economy
b.	to monitor changes in the cost of living
c.	to monitor changes in the level of real GDP
d.	to track changes in the stock market

____ 30.   A German automobile company produces cars in Canada, some of which are exported to other nations. If the price of these cars increases, what happens to the GDP deflator and the CPI?

a.	The GDP deflator and the CPI will both increase.
b.	The GDP deflator will increase, but the CPI will be unchanged.
c.	The GDP deflator will be unchanged, but the CPI will increase.
d.	The GDP deflator and the CPI will both be unchanged.

Answer 1

26. Ans - d) Neither the GDP deflator nor the consumer price index will change

Explanation:

As GDP deflator will not change because it only consider domestically produced good and large tractors are not related to consumers as it is related to producers so CPi also not affected.

27. Ans - a) 1834.20

Explanation:

1000*177/96.5

= 1834.196

= 1834.20

28. Ans - b) Samantha has $100 more in her account, and her purchasing power has increased by about $60

Explanation:

she earn interest of 2000*5% = 100

but due to inflation, her purchasing power reduce by 2000*2% = 40

means purchasing power increase by 100-40 = $60

29. Ans - b) to monitor changes in the cost of living

30. Ans - a) the GDP deflator and the CPI will both increase.

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