Question 1

The distinction between price confusion problems and menu costs is that

Accepted Answer

A)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs have to do with people confusing changes in nominal and real wages. 
B)  menu costs result from confusion between relative demand and inflationary pressures, whereas price confusion has to do with people confusing changes in nominal and real wages. 
C)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs relate to producers changing prices, typically during inflationary periods. 
D)  menu costs occur during deflation, whereas price confusion problems occur during inflation. 
E)  menu costs only affect the food industry, whereas price confusion problems occur in high-tech industries. 
A)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs have to do with people confusing changes in nominal and real wages. 
B)  menu costs result from confusion between relative demand and inflationary pressures, whereas price confusion has to do with people confusing changes in nominal and real wages. 
C)  price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs relate to producers changing prices, typically during inflationary periods. 
D)  menu costs occur during deflation, whereas price confusion problems occur during inflation. 
E)  menu costs only affect the food industry, whereas price confusion problems occur in high-tech industries.

Question 2

You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. If real wages are the only consideration, then

Accepted Answer

A)  you would be indifferent between the two jobs because the real wages would be about the same within 2 percent). 
B)  you would definitely take the job in Chicago because the real wage is higher there. 
C)  you would definitely take the job in Philadelphia because the real wage is higher there. 
D)  you would suffer from money illusion and be conflicted. 
E)  because there is a direct correlation between the real wage and the nominal wage, the job in Philadelphia is definitely the one to take. 
A)  you would be indifferent between the two jobs because the real wages would be about the same within 2 percent). 
B)  you would definitely take the job in Chicago because the real wage is higher there. 
C)  you would definitely take the job in Philadelphia because the real wage is higher there. 
D)  you would suffer from money illusion and be conflicted. 
E)  because there is a direct correlation between the real wage and the nominal wage, the job in Philadelphia is definitely the one to take.

Question 3

Typically if real wages fall, the quantity demanded of labor rises. If workers agree to 3 percent wage increases for a four-year period and inflation is more than 3 percent, then, based on this information alone,

Accepted Answer

A)  workers will have higher real wages because they get paid more. 
B)  the quantity demanded of labor will increase, because real wages fell. 
C)  workers must experience money illusion. 
D)  the quantity demanded of labor will fall. 
E)  the demand, but not the quantity demanded, for labor will fall. 
A)  workers will have higher real wages because they get paid more. 
B)  the quantity demanded of labor will increase, because real wages fell. 
C)  workers must experience money illusion. 
D)  the quantity demanded of labor will fall. 
E)  the demand, but not the quantity demanded, for labor will fall.

Question 4

What are so-called shoe-leather costs associated with inflation? Explain and give examples.

Accepted Answer

Shoe-leather costs consist of all the wa

Question 5

Let's say a company invents a very popular device called a Zorgon, which allows you to send small items via a transporter from one place to another. This would affect the consumer price index CPI) in the sense that the CPI

Accepted Answer

A)  would fail to include purchases of the Zorgon for some period of time after the product entered the market. 
B)  would overstate the cost of the Zorgon because the price would fall over time but the CPI would always be "catching up" and be behind the price decreases. 
C)  would take into account substitution between the Zorgon and the use of shipping services such as FedEx and UPS as the relative price of these changed. 
D)  would fail to take into account the quality of the Zorgon. 
E)  always accurately measures the cost of living. 
A)  would fail to include purchases of the Zorgon for some period of time after the product entered the market. 
B)  would overstate the cost of the Zorgon because the price would fall over time but the CPI would always be "catching up" and be behind the price decreases. 
C)  would take into account substitution between the Zorgon and the use of shipping services such as FedEx and UPS as the relative price of these changed. 
D)  would fail to take into account the quality of the Zorgon. 
E)  always accurately measures the cost of living.

Question 6

As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes

Accepted Answer

A)  future price uncertainty. 
B)  menu costs. 
C)  money illusion. 
D)  hyperinflation. 
E)  a price confusion problem. 
A)  future price uncertainty. 
B)  menu costs. 
C)  money illusion. 
D)  hyperinflation. 
E)  a price confusion problem.

Question 7

Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index CPI) was 18.3 in 1946 and 202.4 in 2011, then Donna's inflation-adjusted wage would be

Accepted Answer

A)  $7.25, by U.S. law. 
B)  $0.30. 
C)  $2.87. 
D)  $0.61. 
E)  $3.32. 
A)  $7.25, by U.S. law. 
B)  $0.30. 
C)  $2.87. 
D)  $0.61. 
E)  $3.32.

Question 8

Suppose a basket of goods and services has been selected to calculate the consumer price index CPI) and 2002 has been chosen as the base year. In 2002, the basket's cost was $76.00; in 2004, the basket's cost was $79.50; and in 2006, the basket's cost was $85.00. The value of the CPI was

Accepted Answer

A)  100 in 2002. 
B)  108 in 2004. 
C)  120 in 2006. 
D)  at least 118 in 2007. 
E)  no more than 90 in 2001. 
A)  100 in 2002. 
B)  108 in 2004. 
C)  120 in 2006. 
D)  at least 118 in 2007. 
E)  no more than 90 in 2001.

Question 9

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

Accepted Answer

A)  The action benefits retirees and anyone else on a fixed income. 
B)  The action promotes the interests of domestic producers at the expense of foreign ones. 
C)  The action enables the government to borrow funds to remain in operation. 
D)  The action temporarily boosts the growth rate of a sluggish economy. 
E)  The action helps to keep inflation under control in the long run. 
A)  The action benefits retirees and anyone else on a fixed income. 
B)  The action promotes the interests of domestic producers at the expense of foreign ones. 
C)  The action enables the government to borrow funds to remain in operation. 
D)  The action temporarily boosts the growth rate of a sluggish economy. 
E)  The action helps to keep inflation under control in the long run.

Question 10

Refer to the following table to answer the next  questions: $$\begin{array} { c r } 
\hline \text { Year } & \text { CPI } \
\hline 1999 & 80 \
2000 & 87 \
2001 & 105 \
2002 & 112 \
2003 & 108 \
2004 & 117 \
\hline
\end{array}$$
-As presented in the table, the rate of inflation from 1999-2000 i.e., during the year 2000) was rounded to two decimal places)

Accepted Answer

A)  7.00 percent. 
B)  80.00 percent. 
C)  87.00 percent. 
D)  8.75 percent. 
E)  10.00 percent. 
A)  7.00 percent. 
B)  80.00 percent. 
C)  87.00 percent. 
D)  8.75 percent. 
E)  10.00 percent.

Question 11

In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means

Accepted Answer

A)  inflation in both nations is 10 percent. 
B)  Nation B suffers from hyperinflation. 
C)  both nations suffer from hyperinflation. 
D)  Nation A is experiencing inflation but Nation B is experiencing deflation. 
E)  Nation A is experiencing inflation of less than 9.1 percent and Nation B is experiencing inflation of less than 8.4 percent. 
A)  inflation in both nations is 10 percent. 
B)  Nation B suffers from hyperinflation. 
C)  both nations suffer from hyperinflation. 
D)  Nation A is experiencing inflation but Nation B is experiencing deflation. 
E)  Nation A is experiencing inflation of less than 9.1 percent and Nation B is experiencing inflation of less than 8.4 percent.

Question 12

The agency that measures the consumer price index CPI) in the United States is the

Accepted Answer

A)  Bureau of Economic Analysis. 
B)  Bureau of Labor Statistics. 
C)  Economic Adjustment Agency. 
D)  Department of Commerce Price Index Office. 
E)  Department of Vital Statistics. 
A)  Bureau of Economic Analysis. 
B)  Bureau of Labor Statistics. 
C)  Economic Adjustment Agency. 
D)  Department of Commerce Price Index Office. 
E)  Department of Vital Statistics.

Question 13

Let's say a bottle of Dr. Wells an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be rounded to the nearest penny)

Accepted Answer

A)  $0.0236. 
B)  $2.36. 
C)  about a dollar. 
D)  $0.95 
E)  $95.00. 
A)  $0.0236. 
B)  $2.36. 
C)  about a dollar. 
D)  $0.95 
E)  $95.00.

Question 14

If everyone buys the same goods every year and the price of housing rises by 38 percent, it is

Accepted Answer

A)  certain the consumer price index CPI) has increased, and if your nominal wage has risen by less than 38 percent, your real wage has fallen. 
B)  certain the consumer price index CPI) has increased, and if your nominal wage has risen by more than 38 percent, your real wage has risen. 
C)  possible that the consumer price index CPI) has increased, but it is certain your real wage has fallen. 
D)  possible that the consumer price index CPI) has increased; however, it is certain your real wage has risen if, and only if, your nominal wage increased by more than 19 percent because housing accounts for exactly 50 percent of the CPI. 
E)  not possible to tell what happened to the consumer price index CPI) because other than for housing, we do not know what happened to the prices of any of the other goods. 
A)  certain the consumer price index CPI) has increased, and if your nominal wage has risen by less than 38 percent, your real wage has fallen. 
B)  certain the consumer price index CPI) has increased, and if your nominal wage has risen by more than 38 percent, your real wage has risen. 
C)  possible that the consumer price index CPI) has increased, but it is certain your real wage has fallen. 
D)  possible that the consumer price index CPI) has increased; however, it is certain your real wage has risen if, and only if, your nominal wage increased by more than 19 percent because housing accounts for exactly 50 percent of the CPI. 
E)  not possible to tell what happened to the consumer price index CPI) because other than for housing, we do not know what happened to the prices of any of the other goods.

The distinction between price confusion problems and menu costs is that

You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. If real wages are the only consideration, then

Typically if real wages fall, the quantity demanded of labor rises. If workers agree to 3 percent wage increases for a four-year period and inflation is more than 3 percent, then, based on this information alone,

What are so-called shoe-leather costs associated with inflation? Explain and give examples.

Let's say a company invents a very popular device called a Zorgon, which allows you to send small items via a transporter from one place to another. This would affect the consumer price index CPI) in the sense that the CPI

As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes

Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index CPI) was 18.3 in 1946 and 202.4 in 2011, then Donna's inflation-adjusted wage would be

Suppose a basket of goods and services has been selected to calculate the consumer price index CPI) and 2002 has been chosen as the base year. In 2002, the basket's cost was $76.00; in 2004, the basket's cost was $79.50; and in 2006, the basket's cost was $85.00. The value of the CPI was

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

Refer to the following table to answer the next questions: Year CPI 1999 80 2000 87 2001 105 2002 112 2003 108 2004 117 -As presented in the table, the rate of inflation from 1999-2000 i.e., during the year 2000) was rounded to two decimal places)

In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means

The agency that measures the consumer price index CPI) in the United States is the

Let's say a bottle of Dr. Wells an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be rounded to the nearest penny)

If everyone buys the same goods every year and the price of housing rises by 38 percent, it is

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

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 Learning Objectives

International Trade

International Finance

Filters

Exam 8: The Price Level and Inflation

The distinction between price confusion problems and menu costs is that

You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. If real wages are the only consideration, then

Typically if real wages fall, the quantity demanded of labor rises. If workers agree to 3 percent wage increases for a four-year period and inflation is more than 3 percent, then, based on this information alone,

What are so-called shoe-leather costs associated with inflation? Explain and give examples.

Let's say a company invents a very popular device called a Zorgon, which allows you to send small items via a transporter from one place to another. This would affect the consumer price index CPI) in the sense that the CPI

As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes

Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index CPI) was 18.3 in 1946 and 202.4 in 2011, then Donna's inflation-adjusted wage would be

Suppose a basket of goods and services has been selected to calculate the consumer price index CPI) and 2002 has been chosen as the base year. In 2002, the basket's cost was $76.00; in 2004, the basket's cost was $79.50; and in 2006, the basket's cost was $85.00. The value of the CPI was

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

Refer to the following table to answer the next questions: Year CPI 1999 80 2000 87 2001 105 2002 112 2003 108 2004 117 -As presented in the table, the rate of inflation from 1999-2000 i.e., during the year 2000) was rounded to two decimal places)

In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means

The agency that measures the consumer price index CPI) in the United States is the

Let's say a bottle of Dr. Wells an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be rounded to the nearest penny)

If everyone buys the same goods every year and the price of housing rises by 38 percent, it is

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

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 Learning Objectives

International Trade

International Finance

Filters