ECON 110 FINAL KEARL BYU EXAM
QUESTIONS AND ANSWERS 100% PASS
2026/2027
What is the Price Level? - ANS The price level is the average of prices which are measured in
dollar terms, or more generally, money terms
What is inflation and how is it measured? - ANS An increase in the price level and is
measured by the percent change in the price level.
What is deflation and how is it measured? - ANS A decrease in the price level, that is, a
general decrease in the average of all prices.
What is disinflation and how is it measured? - ANS This occurs when the rate of inflation
declines.
How is a price index created? - ANS You start with an initial base period for prices then gather
the different prices of those same items over time
What are some problems with the CPI as a measure of the price level? - ANS It does not
accurately reflect what happens to the price of any particular good.
@2026 ALLRIGHTS RESERVED 1
, What is real output and how is it measured? - ANS The actual amount an economy produces
and it is measured by the GDP.
How is real GDP measured? - ANS In dollars and in relation to aggregate or total output.
What are some problems with real GDP as a measure of real output? - ANS 1). It may change
because of price changes even if the rate of production doesn't change in an economy
2). Only measures activities in markets, ignoring non-markets or illegal market transactions
3). Does not include the value of leisure
4). Does not include financial and second-hand transactions
5). Does not include intermediate goods
6). Does not account for the size of a population nor do changes account for population growth
7). Not a measure of individual well-being
What is potential real output? - ANS If all the products that an economy can produced are
employed fully and efficiently, then it is the maximum amount of goods an economy can
produced.
What determines changes in potential real output? - ANS Changes in resources, advances in
technology, advances in labor etc...
What is the role of the labor market in determining potential real output? - ANS The labor
market is a measure of how many people are working or looking for work. So if all of those
people had jobs then that would be the potential real output.
what is real wage? - ANS The dollar wage per hour that individuals are paid.
@2026 ALLRIGHTS RESERVED 2
QUESTIONS AND ANSWERS 100% PASS
2026/2027
What is the Price Level? - ANS The price level is the average of prices which are measured in
dollar terms, or more generally, money terms
What is inflation and how is it measured? - ANS An increase in the price level and is
measured by the percent change in the price level.
What is deflation and how is it measured? - ANS A decrease in the price level, that is, a
general decrease in the average of all prices.
What is disinflation and how is it measured? - ANS This occurs when the rate of inflation
declines.
How is a price index created? - ANS You start with an initial base period for prices then gather
the different prices of those same items over time
What are some problems with the CPI as a measure of the price level? - ANS It does not
accurately reflect what happens to the price of any particular good.
@2026 ALLRIGHTS RESERVED 1
, What is real output and how is it measured? - ANS The actual amount an economy produces
and it is measured by the GDP.
How is real GDP measured? - ANS In dollars and in relation to aggregate or total output.
What are some problems with real GDP as a measure of real output? - ANS 1). It may change
because of price changes even if the rate of production doesn't change in an economy
2). Only measures activities in markets, ignoring non-markets or illegal market transactions
3). Does not include the value of leisure
4). Does not include financial and second-hand transactions
5). Does not include intermediate goods
6). Does not account for the size of a population nor do changes account for population growth
7). Not a measure of individual well-being
What is potential real output? - ANS If all the products that an economy can produced are
employed fully and efficiently, then it is the maximum amount of goods an economy can
produced.
What determines changes in potential real output? - ANS Changes in resources, advances in
technology, advances in labor etc...
What is the role of the labor market in determining potential real output? - ANS The labor
market is a measure of how many people are working or looking for work. So if all of those
people had jobs then that would be the potential real output.
what is real wage? - ANS The dollar wage per hour that individuals are paid.
@2026 ALLRIGHTS RESERVED 2
