Question 1

Refer to the following figure when answering the following questions:  
-Referring to the figure,we can observe that

Accepted Answer

A)  inflation seemed to stabilize in the years 2000-2002,but it then spiked between 2002 and 2004. 
B)  inflation was always under control in every year shown. 
C)  there was a relatively constant increase in inflation throughout the entire period shown. 
D)  inflation tended to fall consistently throughout the entire period shown. 
E)  there were periods of inflation and deflation depicted in the chart. 
A)  inflation seemed to stabilize in the years 2000-2002,but it then spiked between 2002 and 2004. 
B)  inflation was always under control in every year shown. 
C)  there was a relatively constant increase in inflation throughout the entire period shown. 
D)  inflation tended to fall consistently throughout the entire period shown. 
E)  there were periods of inflation and deflation depicted in the chart.

Question 2

You know that the consumer price index (CPI)at the beginning of this year was 250 and the rate of inflation was 14 percent; this would mean the

Accepted Answer

A)  price of cat food increased by exactly 14 percent. 
B)  CPI at the beginning of last year was 215. 
C)  price of dog food probably fell. 
D)  CPI at the end of the year was 285. 
E)  rate of inflation next year will be more than 14 percent. 
A)  price of cat food increased by exactly 14 percent. 
B)  CPI at the beginning of last year was 215. 
C)  price of dog food probably fell. 
D)  CPI at the end of the year was 285. 
E)  rate of inflation next year will be more than 14 percent.

Question 3

Consider the equation %$\Delta$M +%$\Delta$V $\approx$ %$\Delta$P +%$\Delta$Y.If there is no change in real GDP (%$\Delta$Y = 0)and there is no change in the money supply (%$\Delta$M= 0),what would have to happen for there to be inflation (%$\Delta$P  $\gt$ 0)?

Accepted Answer

A)  Money would have to change hands less often,%$\Delta$V $\lt$ 0. 
B)  Money supply times money velocity would have to go down,%$\Delta$M + %$\Delta$V $\lt$ 0. 
C)  Nominal GPD would have to go down,%$\Delta$P + %$\Delta$Y $\lt$ 0. 
D)  Money would have to change hands more often,%$\Delta$V  $\gt$ 0. 
E)  The money velocity would have to remain the same,%$\Delta$V = 0. 
A)  Money would have to change hands less often,%$\Delta$V $\lt$ 0. 
B)  Money supply times money velocity would have to go down,%$\Delta$M + %$\Delta$V $\lt$ 0. 
C)  Nominal GPD would have to go down,%$\Delta$P + %$\Delta$Y $\lt$ 0. 
D)  Money would have to change hands more often,%$\Delta$V  $\gt$ 0. 
E)  The money velocity would have to remain the same,%$\Delta$V = 0.

Question 4

What is one reason why a government will deliberately inflate its national money supply?

Accepted Answer

A)  The action promotes the long-term health of the national economy. 
B)  The action is part of efforts to attract overseas investors and immigrant labor. 
C)  The action is part of printing money to pay off the government's debts. 
D)  The action tamps down the growth rate of an overheated economy. 
E)  The action helps the money supply keep up with the consequences of rising prices. 
A)  The action promotes the long-term health of the national economy. 
B)  The action is part of efforts to attract overseas investors and immigrant labor. 
C)  The action is part of printing money to pay off the government's debts. 
D)  The action tamps down the growth rate of an overheated economy. 
E)  The action helps the money supply keep up with the consequences of rising prices.

Question 5

Refer to the following table to answer the following questions:  
-As presented in the table,the rate of inflation (or deflation)from 2001-2002 was (rounded to two decimal places)

Accepted Answer

A)  7.00 percent. 
B)  105.00 percent. 
C)  112.00 percent. 
D)  6.67 percent. 
E)  6.25 percent. 
A)  7.00 percent. 
B)  105.00 percent. 
C)  112.00 percent. 
D)  6.67 percent. 
E)  6.25 percent.

Question 6

If the price index in 1922 was 17 and a unit of Nabisco Oreo cookies cost $0.32,and if the price index today is 220 and a unit of Nabisco Oreo cookies costs $2.99,then the inflation-adjusted price of Oreos today is

Accepted Answer

A)  almost exactly the same (within 10 percent)as in 1922. 
B)  much higher (twice or more)than in 1922. 
C)  much lower (half or less)than in 1922. 
D)  a bit higher than in 1922. 
E)  a bit lower than in 1922. 
A)  almost exactly the same (within 10 percent)as in 1922. 
B)  much higher (twice or more)than in 1922. 
C)  much lower (half or less)than in 1922. 
D)  a bit higher than in 1922. 
E)  a bit lower than in 1922.

Question 7

The main drawback of the chained consumer price index (CPI)compared to the traditional CPI is that the chained CPI

Accepted Answer

A)  only includes final goods and services. 
B)  is not updated as frequently. 
C)  is more difficult to calculate. 
D)  underestimates true inflation. 
E)  overestimates true inflation. 
A)  only includes final goods and services. 
B)  is not updated as frequently. 
C)  is more difficult to calculate. 
D)  underestimates true inflation. 
E)  overestimates true inflation.

Question 8

The chained consumer price index (CPI)tends to more accurately reflect prices by updating the consumer basket of goods

Accepted Answer

A)  every time any price in the typical consumer basket changes. 
B)  daily. 
C)  weekly. 
D)  monthly. 
E)  annually. 
A)  every time any price in the typical consumer basket changes. 
B)  daily. 
C)  weekly. 
D)  monthly. 
E)  annually.

Question 9

Which of the following reflects a practical example of the price confusion problem?

Accepted Answer

A)  Lines are short at the coffee shop you own because your resource prices are rising and your retail prices must be raised at the same rate; your customers are confused as to whether they should buy from your shop. 
B)  Long lines at the coffee shop you own prompt you to open a new coffee shop,and the second shop is successful. 
C)  It is difficult for you to determine whether the long lines at your coffee shop are due to increased demand or because inflation has created "too many dollars chasing too few goods." 
D)  It is difficult for you to determine the right signal to send to your consumers through prices because the signal sent to you by the Bureau of Labor Statistics is easily misinterpreted. 
E)  Signals sent from consumers to producers are clear but those from producers to consumers are confused. 
A)  Lines are short at the coffee shop you own because your resource prices are rising and your retail prices must be raised at the same rate; your customers are confused as to whether they should buy from your shop. 
B)  Long lines at the coffee shop you own prompt you to open a new coffee shop,and the second shop is successful. 
C)  It is difficult for you to determine whether the long lines at your coffee shop are due to increased demand or because inflation has created "too many dollars chasing too few goods." 
D)  It is difficult for you to determine the right signal to send to your consumers through prices because the signal sent to you by the Bureau of Labor Statistics is easily misinterpreted. 
E)  Signals sent from consumers to producers are clear but those from producers to consumers are confused.

Question 10

It is rare when prices fall in modern times.However,it is likely that they would fall during severe recessions.In what year is this most likely to have occurred?

Accepted Answer

A)  2005 
B)  2009 
C)  2011 
D)  2012 
E)  2003 
A)  2005 
B)  2009 
C)  2011 
D)  2012 
E)  2003

Question 11

Medical care typically composes ________ of the typical consumer price index (CPI).

Accepted Answer

A)  5 percent 
B)  8 percent 
C)  10 percent 
D)  12 percent 
E)  15 percent 
A)  5 percent 
B)  8 percent 
C)  10 percent 
D)  12 percent 
E)  15 percent

Question 12

According to the price confusion problem,if the price of a product increases,then

Accepted Answer

A)  the market demand has increased,and the firm's output should increase. 
B)  the market demand has increased,and the firm's output should decrease. 
C)  the price increase is due to inflation,and the firm's output should increase. 
D)  the price increase is due to inflation,and the firm's output should decrease. 
E)  prices as a whole fall,and the firm's output should increase. 
A)  the market demand has increased,and the firm's output should increase. 
B)  the market demand has increased,and the firm's output should decrease. 
C)  the price increase is due to inflation,and the firm's output should increase. 
D)  the price increase is due to inflation,and the firm's output should decrease. 
E)  prices as a whole fall,and the firm's output should increase.

Question 13

Deflation is occurring in a nation; the implication(s)of this is/are that

Accepted Answer

A)  both real and nominal wages are rising. 
B)  both real and nominal wages are falling. 
C)  if you have no job and have no income,you are better off because things are cheaper. 
D)  holding nominal wages constant,the real wage would rise. 
E)  holding nominal wages constant,the real wage would fall. 
A)  both real and nominal wages are rising. 
B)  both real and nominal wages are falling. 
C)  if you have no job and have no income,you are better off because things are cheaper. 
D)  holding nominal wages constant,the real wage would rise. 
E)  holding nominal wages constant,the real wage would fall.

Question 14

According to the textbook,the top-grossing movie of all time (adjusted for inflation)is

Accepted Answer

A)  Avatar. 
B)  Blade Runner. 
C)  Every Which Way but Loose. 
D)  Star Wars. 
E)  Gone with the Wind. 
A)  Avatar. 
B)  Blade Runner. 
C)  Every Which Way but Loose. 
D)  Star Wars. 
E)  Gone with the Wind.

Question 15

Assume tuition at Houston Community College cost $588 (per semester)in 2004 and $813 in 2012.If the price index was 184 in 2004 and 226 in 2012,then we could say

Accepted Answer

A)  tuition has increased more slowly than inflation. 
B)  tuition has increased more rapidly than inflation. 
C)  tuition has increased at about the same rate as inflation. 
D)  nominal tuition has decreased. 
E)  tuition suffers from menu costs due to inflation. 
A)  tuition has increased more slowly than inflation. 
B)  tuition has increased more rapidly than inflation. 
C)  tuition has increased at about the same rate as inflation. 
D)  nominal tuition has decreased. 
E)  tuition suffers from menu costs due to inflation.

Question 16

If your nominal wage rises but you think that it automatically means your real wage rose,then you are

Accepted Answer

A)  suffering from money illusion. 
B)  experiencing the substitution effect. 
C)  suffering from the heterogeneity illusion effect. 
D)  experiencing the income effect. 
E)  suffering from the price confusion problem. 
A)  suffering from money illusion. 
B)  experiencing the substitution effect. 
C)  suffering from the heterogeneity illusion effect. 
D)  experiencing the income effect. 
E)  suffering from the price confusion problem.

Question 17

Typically the consumer price index (CPI)is calculated by checking the prices of

Accepted Answer

A)  all goods in 38 geographic locations. 
B)  only consumer goods in all populated places in the United States (using the Census Bureau's definition of a populated place). 
C)  about 8,000 goods in about 38 locations across the United States. 
D)  about 8,000 goods in about 38 locations in North America. 
E)  about 10,000 goods in about 75 locations in the United States. 
A)  all goods in 38 geographic locations. 
B)  only consumer goods in all populated places in the United States (using the Census Bureau's definition of a populated place). 
C)  about 8,000 goods in about 38 locations across the United States. 
D)  about 8,000 goods in about 38 locations in North America. 
E)  about 10,000 goods in about 75 locations in the United States.

Question 18

How do you convert a price of a good from an earlier time into today's price?

Accepted Answer

A)  Take the earlier price and divide by today's price,then multiply by the ratio of the consumer price index (CPI)today to that of the CPI in the old year. 
B)  Take the earlier price and multiply by the ratio of the earlier gross domestic product (GDP)deflator to today's consumer price index. 
C)  Take today's price and divide by the earlier price in terms of the gross domestic product (GDP)deflator. 
D)  Take the earlier price and multiply by the ratio of today's consumer price index (CPI)to the earlier CPI. 
E)  Take the earlier price and multiply by the ratio of the earlier consumer price index (CPI)to the current CPI. 
A)  Take the earlier price and divide by today's price,then multiply by the ratio of the consumer price index (CPI)today to that of the CPI in the old year. 
B)  Take the earlier price and multiply by the ratio of the earlier gross domestic product (GDP)deflator to today's consumer price index. 
C)  Take today's price and divide by the earlier price in terms of the gross domestic product (GDP)deflator. 
D)  Take the earlier price and multiply by the ratio of today's consumer price index (CPI)to the earlier CPI. 
E)  Take the earlier price and multiply by the ratio of the earlier consumer price index (CPI)to the current CPI.

Question 19

In some nations the only currency is gold.Someone proposes the argument that if gold were the only currency,there could not be inflation.Would you agree or disagree with this statement? Explain.

Accepted Answer

Disagree.If there were more gold availab

Question 20

If Robert was earning $10,000 and now earns $11,500,then

Accepted Answer

A)  Robert's real income must have risen. 
B)  Robert's real wage has increased,but we can't tell about his nominal wage. 
C)  Robert could suffer from money illusion if prices increase by 15 percent or more. 
D)  Robert could experience menu costs if the items on the "value menu" increase in price. 
E)  Robert will be confused about relative price increases and inflation. 
A)  Robert's real income must have risen. 
B)  Robert's real wage has increased,but we can't tell about his nominal wage. 
C)  Robert could suffer from money illusion if prices increase by 15 percent or more. 
D)  Robert could experience menu costs if the items on the "value menu" increase in price. 
E)  Robert will be confused about relative price increases and inflation.

Exam 21: The Price Level and Inflation

Refer to the following figure when answering the following questions: -Referring to the figure,we can observe that

You know that the consumer price index (CPI)at the beginning of this year was 250 and the rate of inflation was 14 percent; this would mean the

Consider the equation % Δ\DeltaΔ M +% Δ\DeltaΔ V ≈\approx≈ % Δ\DeltaΔ P +% Δ\DeltaΔ Y.If there is no change in real GDP (% Δ\DeltaΔ Y = 0)and there is no change in the money supply (% Δ\DeltaΔ M= 0),what would have to happen for there to be inflation (% Δ\DeltaΔ P >\gt> 0)?

What is one reason why a government will deliberately inflate its national money supply?

Refer to the following table to answer the following questions: -As presented in the table,the rate of inflation (or deflation)from 2001-2002 was (rounded to two decimal places)

If the price index in 1922 was 17 and a unit of Nabisco Oreo cookies cost $0.32,and if the price index today is 220 and a unit of Nabisco Oreo cookies costs $2.99,then the inflation-adjusted price of Oreos today is

The main drawback of the chained consumer price index (CPI)compared to the traditional CPI is that the chained CPI

The chained consumer price index (CPI)tends to more accurately reflect prices by updating the consumer basket of goods

Which of the following reflects a practical example of the price confusion problem?

It is rare when prices fall in modern times.However,it is likely that they would fall during severe recessions.In what year is this most likely to have occurred?

Medical care typically composes ________ of the typical consumer price index (CPI).

According to the price confusion problem,if the price of a product increases,then

Deflation is occurring in a nation; the implication(s)of this is/are that

According to the textbook,the top-grossing movie of all time (adjusted for inflation)is

Assume tuition at Houston Community College cost $588 (per semester)in 2004 and $813 in 2012.If the price index was 184 in 2004 and 226 in 2012,then we could say

If your nominal wage rises but you think that it automatically means your real wage rose,then you are

Typically the consumer price index (CPI)is calculated by checking the prices of

How do you convert a price of a good from an earlier time into today's price?

In some nations the only currency is gold.Someone proposes the argument that if gold were the only currency,there could not be inflation.Would you agree or disagree with this statement? Explain.

If Robert was earning $10,000 and now earns $11,500,then

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Elasticity

Market Outcomes and Tax Incidence

Price Controls

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income,inequality,and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

Savings,interest Rates,and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

Consider the equation % $\Delta$ M +% $\Delta$ V $\approx$ % $\Delta$ P +% $\Delta$ Y.If there is no change in real GDP (% $\Delta$ Y = 0)and there is no change in the money supply (% $\Delta$ M= 0),what would have to happen for there to be inflation (% $\Delta$ P $\gt$ 0)?