CLEP Macroeconomics chapter practice4 questions

02 Math, Graphs, and Economic Reasoning

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

A price index equals 120 in one year and 126 in the following year. Measured from the earlier year, the rate of inflation is

Inflation is (126-120)/(120)=0.05, or 5 percent. A divides the six-point change by the later reading of 126, C reports index points as though a point were a percent, D measures the current index against the base of 100 instead of against last year, and E reports the ratio (126)/(120) rather than the change in it.
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B. 5 percent

Inflation is (126-120)/(120)=0.05, or 5 percent. A divides the six-point change by the later reading of 126, C reports index points as though a point were a percent, D measures the current index against the base of 100 instead of against last year, and E reports the ratio (126)/(120) rather than the change in it.

Question 2

Question 2 of 4

The price of a good falls and the quantity demanded rises, with no other determinant of demand changing. Which of the following describes that change?

The good's own price sits on the vertical axis, so a change in it slides buyers along the curve they were already on. A and B relocate the demand curve, which takes a determinant outside the axes, and A additionally reverses the direction implied by a price cut. D moves the supply curve, and E puts the response on the sellers' curve when the stem reports what buyers did.
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C. A movement along the demand curve

The good's own price sits on the vertical axis, so a change in it slides buyers along the curve they were already on. A and B relocate the demand curve, which takes a determinant outside the axes, and A additionally reverses the direction implied by a price cut. D moves the supply curve, and E puts the response on the sellers' curve when the stem reports what buyers did.

Question 3

Question 3 of 4

Nominal output in Country X is $660 billion and the price index for the same year is 110. Real output equals

Real output is (660)/(110)×100=600. Choice A subtracts the index points from the nominal figure, B cuts 10 percent off nominal output instead of dividing by the index, D multiplies by 1.10 where the correction calls for division, and E adds the index points to the nominal level.
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C. $600 billion

Real output is (660)/(110)×100=600. Choice A subtracts the index points from the nominal figure, B cuts 10 percent off nominal output instead of dividing by the index, D multiplies by 1.10 where the correction calls for division, and E adds the index points to the nominal level.

Question 4

Question 4 of 4

In a single market, demand shifts right while supply shifts left at the same time. Which of the following outcomes is certain?

Stronger demand and weaker supply both push price up, so the price direction is settled before any shift sizes are known. The two shifts pull quantity opposite ways, so A and B each claim a direction the information cannot supply. D reverses the one result that is certain, and C denies that anything moved.
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E. Equilibrium price rises.

Stronger demand and weaker supply both push price up, so the price direction is settled before any shift sizes are known. The two shifts pull quantity opposite ways, so A and B each claim a direction the information cannot supply. D reverses the one result that is certain, and C denies that anything moved.

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