For each of the following, decide if the increase in price of the following goods will be reflected in the U.S. GDP deflator and / or the CPI or neither.
a. Australian-made shoes imported into the United States.
b. Domestically-produced industrial robots.
c. Tractors imported into the United States from Russia.
d. Dairy products produced domestically.
e. Imported olive oil produced by a U.S. company in Spain.
f. A fighter jet bought with the national defense budget.
9. True/False statements. Simply state if the statement is true or false. No explanation required.
a. If the price of imported oil increases, the GDP deflator increases by less than the CPI.
b. Henry Ford paid his workers $5 a day in 1914 when the CPI was 10. Today with a price index at 177, the $5 a day is worth $88.50.
c. Expenditures by households on education services are included in the consumption component of GDP.
d. Assume the CPI was 110 in 2006 and 114 in 2007. The real interest rate during this period was 6.5%. It implies that the nominal interest rate was 10.14% (rounded to 2 decimals).
e. Nominal interest rates can never be negative.
f. The CPI is computed by finding the price of a market basket of goods and services whose contents vary each year