Question 1

In what sense is it a cost that people must spend time and resources coping with inflation?

Accepted Answer

A)  Because the loss of time and resources frustrates people unnecessarily 
B)  Because the time and resources could have been used to produce something else instead 
C)  Because the time and resources could have been wasted elsewhere 
D)  Because the time and resources are a sunk cost 
E)  Because the time and resources are insufficient to cope with the problem 
A)  Because the loss of time and resources frustrates people unnecessarily 
B)  Because the time and resources could have been used to produce something else instead 
C)  Because the time and resources could have been wasted elsewhere 
D)  Because the time and resources are a sunk cost 
E)  Because the time and resources are insufficient to cope with the problem

Question 2

When a payment is indexed to inflation and the price index understates inflation,

Accepted Answer

A)  the real payment decreases over time 
B)  the real payment increases over time 
C)  the nominal payment decreases over time 
D)  in unemployment rate will increase 
E)  the level of unemployment will increase 
A)  the real payment decreases over time 
B)  the real payment increases over time 
C)  the nominal payment decreases over time 
D)  in unemployment rate will increase 
E)  the level of unemployment will increase

Question 3

If a lender wants a real return of 6 percent and she expects inflation to be 4 percent,which of the following is the correct nominal interest rate to charge?

Accepted Answer

A)  4 percent 
B)  6 percent 
C)  2 percent 
D)  10 percent 
E)  -2 percent 
A)  4 percent 
B)  6 percent 
C)  2 percent 
D)  10 percent 
E)  -2 percent

Question 4

As of December 2008,the most important category in the CPI is

Accepted Answer

A)  medical care 
B)  education 
C)  transportation 
D)  food and beverages 
E)  housing. 
A)  medical care 
B)  education 
C)  transportation 
D)  food and beverages 
E)  housing.

Question 5

Which of the following would be a redistributive cost of inflation?

Accepted Answer

A)  Additional trips to the bank 
B)  Reprinting menus and price tags 
C)  Comparison shopping 
D)  The real amount paid back for a loan compared to the expected real payments 
E)  The actual nominal rate on a loan compared to the expected nominal rate 
A)  Additional trips to the bank 
B)  Reprinting menus and price tags 
C)  Comparison shopping 
D)  The real amount paid back for a loan compared to the expected real payments 
E)  The actual nominal rate on a loan compared to the expected nominal rate

Question 6

The highest annual inflation rate experienced in the United States during the past 50 years has been around

Accepted Answer

A)  3 percent 
B)  9 percent 
C)  14 percent 
D)  27 percent 
E)  1,000 percent 
A)  3 percent 
B)  9 percent 
C)  14 percent 
D)  27 percent 
E)  1,000 percent

Question 7

The formula for determining a real variable is real variable =

Accepted Answer

A)  (nominal variable ÷100)× CPI 
B)  (nominal variable× CPI)÷ 100 
C)  (nominal variable ÷ price index)×100 
D)  (nominal variable ÷price index)+ 100 
E)  (nominal variable÷price index)÷ 100 
A)  (nominal variable ÷100)× CPI 
B)  (nominal variable× CPI)÷ 100 
C)  (nominal variable ÷ price index)×100 
D)  (nominal variable ÷price index)+ 100 
E)  (nominal variable÷price index)÷ 100

Question 8

The consumer price index includes all of the following goods and services except

Accepted Answer

A)  bonds of US corporations 
B)  French wine 
C)  Japanese VCRs 
D)  used cars 
E)  toiletries 
A)  bonds of US corporations 
B)  French wine 
C)  Japanese VCRs 
D)  used cars 
E)  toiletries

Question 9

Which of the following is a definition of the real interest rate in a world with a positive inflation rate?

Accepted Answer

A)  The percentage increase in the borrower's purchasing power from taking a loan 
B)  The percentage decrease in the borrower's dollars from taking a loan 
C)  The percentage increase in the lender's purchasing power from making a loan 
D)  The percentage increase in the lender's dollars from making a loan 
E)  The percentage decrease in the lender's dollars from making a loan 
A)  The percentage increase in the borrower's purchasing power from taking a loan 
B)  The percentage decrease in the borrower's dollars from taking a loan 
C)  The percentage increase in the lender's purchasing power from making a loan 
D)  The percentage increase in the lender's dollars from making a loan 
E)  The percentage decrease in the lender's dollars from making a loan

Question 10

Which of the following would be example(s)of the resource cost of inflation?

Accepted Answer

A)  Shopping several web sites to check prices 
B)  Changing price tags 
C)  Re-printing menus 
D)  The wear and tear on your car from additional trips to the bank 
E)  All of the above 
A)  Shopping several web sites to check prices 
B)  Changing price tags 
C)  Re-printing menus 
D)  The wear and tear on your car from additional trips to the bank 
E)  All of the above

Question 11

Which of the following would be considered a resource cost of inflation?

Accepted Answer

A)  A cost of living adjustment 
B)  Loss of purchasing power 
C)  Additional trips to the bank 
D)  Adjusting nominal interest rate to get real rates 
E)  Creeping inflation 
A)  A cost of living adjustment 
B)  Loss of purchasing power 
C)  Additional trips to the bank 
D)  Adjusting nominal interest rate to get real rates 
E)  Creeping inflation

Question 12

Which of the following best describes the term deflation?

Accepted Answer

A)  A falling inflation rate 
B)  A negative price level 
C)  A negative inflation rate 
D)  An increasing inflation rate 
E)  A positive inflation rate 
A)  A falling inflation rate 
B)  A negative price level 
C)  A negative inflation rate 
D)  An increasing inflation rate 
E)  A positive inflation rate

Question 13

A payment that is periodically adjusted in proportion to a price index such as the CPI is known as a(n)

Accepted Answer

A)  unionized payment. 
B)  indexed payment. 
C)  scaled payment. 
D)  inflated payment. 
E)  adjusted payment. 
A)  unionized payment. 
B)  indexed payment. 
C)  scaled payment. 
D)  inflated payment. 
E)  adjusted payment.

Question 14

What is creeping inflation?

Accepted Answer

A)  Inflation that continues to rise but slowly. 
B)  Inflation that suddenly appears without warning. 
C)  Price levels that suddenly rise without warning. 
D)  Price levels that continue to rise but slowly. 
E)  Inflation that suddenly appears and creates panic. 
A)  Inflation that continues to rise but slowly. 
B)  Inflation that suddenly appears without warning. 
C)  Price levels that suddenly rise without warning. 
D)  Price levels that continue to rise but slowly. 
E)  Inflation that suddenly appears and creates panic.

Question 15

Social Security is indexed by the CPI.As a result

Accepted Answer

A)  it is "over-indexed." 
B)  it ignores inflation 
C)  it is "under-indexed." 
D)  it is "un-indexed." 
E)  it is "over-subscribed." 
A)  it is "over-indexed." 
B)  it ignores inflation 
C)  it is "under-indexed." 
D)  it is "un-indexed." 
E)  it is "over-subscribed."

Question 16

Suppose you are seeking a real wage increase of 2% and you expect inflation to be 3%.What nominal wage increase should you seek?

Accepted Answer

A)  2.0% 
B)  3.0% 
C)  1.0% 
D)  5.0% 
E)  1.5% 
A)  2.0% 
B)  3.0% 
C)  1.0% 
D)  5.0% 
E)  1.5%

Question 17

If the Consumer Price Index (CPI)increases from 100 to 200 and the nominal wage increases from $100 to $400,what is the change in the real wage in terms of the beginning year's dollars?

Accepted Answer

A)  +$200 
B)  +$400 
C)  +$100 
D)  +$300 
E)  -$200 
A)  +$200 
B)  +$400 
C)  +$100 
D)  +$300 
E)  -$200

Question 18

Suppose the nominal interest rate charged is 5 percent and the expected inflation rate is 2 percent.Which of the following is the expected real interest rate?

Accepted Answer

A)  2 percent 
B)  5 percent 
C)  7 percent 
D)  -3 percent 
E)  3 percent 
A)  2 percent 
B)  5 percent 
C)  7 percent 
D)  -3 percent 
E)  3 percent

Question 19

If we knew that the price of goods rose,on average,by 5 percent last year and by 4 percent this year,we would know

Accepted Answer

A)  nothing about the rate of inflation 
B)  that the inflation rate is rising 
C)  that the inflation rate is falling 
D)  that we are in a stagflation 
E)  that we are in a recession 
A)  nothing about the rate of inflation 
B)  that the inflation rate is rising 
C)  that the inflation rate is falling 
D)  that we are in a stagflation 
E)  that we are in a recession

Question 20

The evidence from wage data allows us to conclude that nonsupervisory workers were economically worse off in 2008 than 1975.

Accepted Answer

A)  This conclusion is correct because such workers have been suffering form increasing unemployment since 1975 
B)  This conclusion is correct because such workers have been receiving an ever-decreasing share of their income in nonwage benefits. 
C)  This conclusion is correct because nominal wages for such workers have stayed constant since 1975. 
D)  This conclusion is correct because nominal wages for such workers have fallen since 1975. 
E)  This is a mistaken conclusion because the CPI overstates inflation. 
A)  This conclusion is correct because such workers have been suffering form increasing unemployment since 1975 
B)  This conclusion is correct because such workers have been receiving an ever-decreasing share of their income in nonwage benefits. 
C)  This conclusion is correct because nominal wages for such workers have stayed constant since 1975. 
D)  This conclusion is correct because nominal wages for such workers have fallen since 1975. 
E)  This is a mistaken conclusion because the CPI overstates inflation.

In what sense is it a cost that people must spend time and resources coping with inflation?

When a payment is indexed to inflation and the price index understates inflation,

If a lender wants a real return of 6 percent and she expects inflation to be 4 percent,which of the following is the correct nominal interest rate to charge?

As of December 2008,the most important category in the CPI is

Which of the following would be a redistributive cost of inflation?

The highest annual inflation rate experienced in the United States during the past 50 years has been around

The formula for determining a real variable is real variable =

The consumer price index includes all of the following goods and services except

Which of the following is a definition of the real interest rate in a world with a positive inflation rate?

Which of the following would be example(s)of the resource cost of inflation?

Which of the following would be considered a resource cost of inflation?

Which of the following best describes the term deflation?

A payment that is periodically adjusted in proportion to a price index such as the CPI is known as a(n)

What is creeping inflation?

Social Security is indexed by the CPI.As a result

Suppose you are seeking a real wage increase of 2% and you expect inflation to be 3%.What nominal wage increase should you seek?

If the Consumer Price Index (CPI)increases from 100 to 200 and the nominal wage increases from $100 to $400,what is the change in the real wage in terms of the beginning year's dollars?

Suppose the nominal interest rate charged is 5 percent and the expected inflation rate is 2 percent.Which of the following is the expected real interest rate?

If we knew that the price of goods rose,on average,by 5 percent last year and by 4 percent this year,we would know

The evidence from wage data allows us to conclude that nonsupervisory workers were economically worse off in 2008 than 1975.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 7: The Price Level and Inflation

In what sense is it a cost that people must spend time and resources coping with inflation?

When a payment is indexed to inflation and the price index understates inflation,

If a lender wants a real return of 6 percent and she expects inflation to be 4 percent,which of the following is the correct nominal interest rate to charge?

As of December 2008,the most important category in the CPI is

Which of the following would be a redistributive cost of inflation?

The highest annual inflation rate experienced in the United States during the past 50 years has been around

The formula for determining a real variable is real variable =

The consumer price index includes all of the following goods and services except

Which of the following is a definition of the real interest rate in a world with a positive inflation rate?

Which of the following would be example(s)of the resource cost of inflation?

Which of the following would be considered a resource cost of inflation?

Which of the following best describes the term deflation?

A payment that is periodically adjusted in proportion to a price index such as the CPI is known as a(n)

What is creeping inflation?

Social Security is indexed by the CPI.As a result

Suppose you are seeking a real wage increase of 2% and you expect inflation to be 3%.What nominal wage increase should you seek?

If the Consumer Price Index (CPI)increases from 100 to 200 and the nominal wage increases from $100 to $400,what is the change in the real wage in terms of the beginning year's dollars?

Suppose the nominal interest rate charged is 5 percent and the expected inflation rate is 2 percent.Which of the following is the expected real interest rate?

If we knew that the price of goods rose,on average,by 5 percent last year and by 4 percent this year,we would know

The evidence from wage data allows us to conclude that nonsupervisory workers were economically worse off in 2008 than 1975.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters