Question 1

Inflation is harmful to society because it often

Accepted Answer

A)  causes consumers' purchasing power to decline 
B)  causes sellers' costs to increase 
C)  causes nominal wages to fall 
D)  causes purchasing power to be redistributed in haphazard ways 
E)  has no effect at all on anyone's purchasing power 
A)  causes consumers' purchasing power to decline 
B)  causes sellers' costs to increase 
C)  causes nominal wages to fall 
D)  causes purchasing power to be redistributed in haphazard ways 
E)  has no effect at all on anyone's purchasing power

Question 2

The Consumer Price Index (CPI)is an index of the cost of a market basket of goods purchased by a typical household.

Accepted Answer

A) True 
 B)False

Question 3

The resource cost of inflation refers to

Accepted Answer

A)  the opportunity cost of the resources spent coping with inflation 
B)  the redistribution of resources due to inflation 
C)  the lost purchasing power due to inflation 
D)  the lost real income due to inflation 
E)  the resources lost due to asking for higher nominal wage increase 
A)  the opportunity cost of the resources spent coping with inflation 
B)  the redistribution of resources due to inflation 
C)  the lost purchasing power due to inflation 
D)  the lost real income due to inflation 
E)  the resources lost due to asking for higher nominal wage increase

Question 4

In the following index: 2003 = 123.3;2004 = 145.3;2005 = 111.4;2006 = 100;2007 = 94.3,what is the rate of change from 2006 to 2007?

Accepted Answer

A)  5.7% 
B)  5% 
C)  4.3% 
D)  2.5% 
E)  unable to determine 
A)  5.7% 
B)  5% 
C)  4.3% 
D)  2.5% 
E)  unable to determine

Question 5

If a newspaper reporter wanted to learn about changes in the U.S.price levels,she would probably get that information by looking at the

Accepted Answer

A)  real gross domestic product 
B)  consumer price index 
C)  latest press release from the Council of Economic Indicators 
D)  nominal gross domestic product 
E)  gross national product 
A)  real gross domestic product 
B)  consumer price index 
C)  latest press release from the Council of Economic Indicators 
D)  nominal gross domestic product 
E)  gross national product

Question 6

The inflation rate for a given year is found by taking the percentage change in the Consumer Price Index (CPI)from the base year to the year in question.

Accepted Answer

A) True 
 B)False

Question 7

The CPI is the price index used to calculate real GDP.

Accepted Answer

A) True 
 B)False

Question 8

If a lender charged a 9 percent nominal interest rate and the expected inflation rate is 4 percent,what is the difference between the real rate the lender received and the real rate the lender expected when actual inflation ended up being 2 percent?

Accepted Answer

A)  2 percent 
B)  4 percent 
C)  -4 percent 
D)  1 percent 
E)  0 percent 
A)  2 percent 
B)  4 percent 
C)  -4 percent 
D)  1 percent 
E)  0 percent

Question 9

If you borrow money at a 9% nominal rate and the inflation rate is 2%,what is the real interest rate on the loan?

Accepted Answer

A)  9.0% 
B)  11.0% 
C)  7.0% 
D)  2.0% 
E)  4.5% 
A)  9.0% 
B)  11.0% 
C)  7.0% 
D)  2.0% 
E)  4.5%

Question 10

The Consumer Price Index excludes all of the following,except one.Which one is included in the CPI?

Accepted Answer

A)  Services purchased directly by consumers 
B)  Raw materials 
C)  Services purchased by the government 
D)  Machinery purchased by firms 
E)  Intermediate goods purchased by firms 
A)  Services purchased directly by consumers 
B)  Raw materials 
C)  Services purchased by the government 
D)  Machinery purchased by firms 
E)  Intermediate goods purchased by firms

Question 11

"Rising prices" and "rising inflation" mean the same thing.

Accepted Answer

A) True 
 B)False

Question 12

How are the prices of various goods and services determined for the Consumer Price Index (CPI)?

Accepted Answer

A)  By an extensive annual household survey 
B)  By an extensive monthly survey of stores,apartments,and owner-occupied homes 
C)  By an extensive annual survey of stores,apartments,and owner-occupied homes 
D)  By an extensive monthly household survey 
E)  Through the same survey used to determine the typical market basket 
A)  By an extensive annual household survey 
B)  By an extensive monthly survey of stores,apartments,and owner-occupied homes 
C)  By an extensive annual survey of stores,apartments,and owner-occupied homes 
D)  By an extensive monthly household survey 
E)  Through the same survey used to determine the typical market basket

Question 13

The real wage rate measures

Accepted Answer

A)  nominal wages after taxes 
B)  what workers are paid in terms of this year's dollars 
C)  what workers are paid in terms of purchasing power 
D)  what workers have available for spending after paying their bills 
E)  the number of dollars earned by workers 
A)  nominal wages after taxes 
B)  what workers are paid in terms of this year's dollars 
C)  what workers are paid in terms of purchasing power 
D)  what workers have available for spending after paying their bills 
E)  the number of dollars earned by workers

Question 14

Factors that cause the CPI to exaggerate the inflation rate do not include

Accepted Answer

A)  the tendency of consumers to substitute relatively cheaper goods for those that have become relatively more expensive 
B)  political pressure from unions and retirees on the Bureau of Labor Statistics to overstate the inflation rate 
C)  the introduction of new technologies that make it easier to obtain the same standard of living 
D)  improvements over time on the quality of products 
E)  the increase in purchases from discount stores 
A)  the tendency of consumers to substitute relatively cheaper goods for those that have become relatively more expensive 
B)  political pressure from unions and retirees on the Bureau of Labor Statistics to overstate the inflation rate 
C)  the introduction of new technologies that make it easier to obtain the same standard of living 
D)  improvements over time on the quality of products 
E)  the increase in purchases from discount stores

Question 15

Use the table below to find the real wage in 2007 (in 2006 dollars).
$ \begin{array}{lcc}\frac{\text { Year }}{2006} & \frac{\text { Nominal Wage }(\$ / \text { hour })}{\$ 12.50} & \frac{\text { CPI }}{155.0} \ 2007 & \$ 13.00 & 160.0\end{array} $

Accepted Answer

A)  $8.06 
B)  $8.13 
C)  $8.39 
D)  $13.00 
E)  $7.81 
A)  $8.06 
B)  $8.13 
C)  $8.39 
D)  $13.00 
E)  $7.81

Question 16

Which of the following can happen?

Accepted Answer

A)  Prices are rising and the inflation rate is negative but rising. 
B)  Prices are falling and the inflation rate is positive and falling. 
C)  Prices are falling and the inflation rate is positive and rising. 
D)  Prices are rising and the inflation rate is positive but falling. 
E)  Prices are rising and the inflation rate is negative and falling. 
A)  Prices are rising and the inflation rate is negative but rising. 
B)  Prices are falling and the inflation rate is positive and falling. 
C)  Prices are falling and the inflation rate is positive and rising. 
D)  Prices are rising and the inflation rate is positive but falling. 
E)  Prices are rising and the inflation rate is negative and falling.

Question 17

Everything else constant,who is least likely to lose from unexpected inflation?

Accepted Answer

A)  A retired person whose pension payments are fixed in dollars 
B)  A person with a large amount of money deposited in a savings account 
C)  A bank scheduled to receive fixed nominal mortgage payments 
D)  A homeowner scheduled to make fixed nominal mortgage payments 
E)  A consumer who spends extra time shopping for the lowest prices 
A)  A retired person whose pension payments are fixed in dollars 
B)  A person with a large amount of money deposited in a savings account 
C)  A bank scheduled to receive fixed nominal mortgage payments 
D)  A homeowner scheduled to make fixed nominal mortgage payments 
E)  A consumer who spends extra time shopping for the lowest prices

Question 18

A labor union anticipates a 7 percent inflation rate in each of the next three years.It wants to obtain a 3 percent increase in real wages in each of those three years.To obtain this goal,the requisite nominal wage hike it should negotiate is

Accepted Answer

A)  7 percent each year 
B)  3 percent each year 
C)  10 percent each year 
D)  10 percent the first year and 3 percent each year thereafter 
E)  21 percent the first year and 3 percent each year thereafter 
A)  7 percent each year 
B)  3 percent each year 
C)  10 percent each year 
D)  10 percent the first year and 3 percent each year thereafter 
E)  21 percent the first year and 3 percent each year thereafter

Question 19

The CPI is used

Accepted Answer

A)  to estimate from estimated to actual values 
B)  to translate from real to nominal values 
C)  to translate from nominal to real values 
D)  as a policy target 
E) c and d. 
A)  to estimate from estimated to actual values 
B)  to translate from real to nominal values 
C)  to translate from nominal to real values 
D)  as a policy target 
E) c and d.

Question 20

The CPI includes the prices of

Accepted Answer

A)  goods and services purchased by American consumers 
B)  goods and services purchased by all consumers (both foreign and domestic) 
C)  goods and services purchased by the government 
D)  investment goods purchased by businesses 
E)  exports purchased by foreign buyers 
A)  goods and services purchased by American consumers 
B)  goods and services purchased by all consumers (both foreign and domestic) 
C)  goods and services purchased by the government 
D)  investment goods purchased by businesses 
E)  exports purchased by foreign buyers

Inflation is harmful to society because it often

The Consumer Price Index (CPI)is an index of the cost of a market basket of goods purchased by a typical household.

The resource cost of inflation refers to

In the following index: 2003 = 123.3;2004 = 145.3;2005 = 111.4;2006 = 100;2007 = 94.3,what is the rate of change from 2006 to 2007?

If a newspaper reporter wanted to learn about changes in the U.S.price levels,she would probably get that information by looking at the

The inflation rate for a given year is found by taking the percentage change in the Consumer Price Index (CPI)from the base year to the year in question.

The CPI is the price index used to calculate real GDP.

If a lender charged a 9 percent nominal interest rate and the expected inflation rate is 4 percent,what is the difference between the real rate the lender received and the real rate the lender expected when actual inflation ended up being 2 percent?

If you borrow money at a 9% nominal rate and the inflation rate is 2%,what is the real interest rate on the loan?

The Consumer Price Index excludes all of the following,except one.Which one is included in the CPI?

"Rising prices" and "rising inflation" mean the same thing.

How are the prices of various goods and services determined for the Consumer Price Index (CPI)?

The real wage rate measures

Factors that cause the CPI to exaggerate the inflation rate do not include

Use the table below to find the real wage in 2007 (in 2006 dollars). 2007 \ 13.00 160.0

Which of the following can happen?

Everything else constant,who is least likely to lose from unexpected inflation?

A labor union anticipates a 7 percent inflation rate in each of the next three years.It wants to obtain a 3 percent increase in real wages in each of those three years.To obtain this goal,the requisite nominal wage hike it should negotiate is

The CPI is used

The CPI includes the prices of

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

Inflation is harmful to society because it often

The Consumer Price Index (CPI)is an index of the cost of a market basket of goods purchased by a typical household.

The resource cost of inflation refers to

In the following index: 2003 = 123.3;2004 = 145.3;2005 = 111.4;2006 = 100;2007 = 94.3,what is the rate of change from 2006 to 2007?

If a newspaper reporter wanted to learn about changes in the U.S.price levels,she would probably get that information by looking at the

The inflation rate for a given year is found by taking the percentage change in the Consumer Price Index (CPI)from the base year to the year in question.

The CPI is the price index used to calculate real GDP.

If a lender charged a 9 percent nominal interest rate and the expected inflation rate is 4 percent,what is the difference between the real rate the lender received and the real rate the lender expected when actual inflation ended up being 2 percent?

If you borrow money at a 9% nominal rate and the inflation rate is 2%,what is the real interest rate on the loan?

The Consumer Price Index excludes all of the following,except one.Which one is included in the CPI?

"Rising prices" and "rising inflation" mean the same thing.

How are the prices of various goods and services determined for the Consumer Price Index (CPI)?

The real wage rate measures

Factors that cause the CPI to exaggerate the inflation rate do not include

Use the table below to find the real wage in 2007 (in 2006 dollars). 2007 \ 13.00 160.0

Which of the following can happen?

Everything else constant,who is least likely to lose from unexpected inflation?

A labor union anticipates a 7 percent inflation rate in each of the next three years.It wants to obtain a 3 percent increase in real wages in each of those three years.To obtain this goal,the requisite nominal wage hike it should negotiate is

The CPI is used

The CPI includes the prices of

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