Exam 1

1. Change had to do with changing 2012 to 2020 in a few places.

2. (15 points) List five limitations of using GDP as a measure of economic well-being.

3. (15 points) List and explain the three limitations of using the CPI to measure the cost of living

4. (10 points) Suppose spending on the market basket in the base year (2005) is $7 trillion and spending in 2021 is $14 trillion. Calculate the inflation rate

5. (10 points) Henry Ford paid his workers $5 a day in 1914. If the consumer price index was 10 in 1914 and 260 in 2021, how much is the Ford paycheck worth in today’s dollars?

6. Added 10 people who were unemployed--not working but actively looking for a job.

7. (10 points) Congress is currently considering raising the minimum wage to $15. What effect is this likely to have on the demand for labor? What effect is this likely to have on the supply of labor? What overall effect will these effects have on unemployment?