Question 1

Workers are generally in a better position to protect themselves from inflation in comparison to retired persons because workers' incomes

Accepted Answer

A)  are more likely to be fixed. 
B)  are more likely to be variable. 
C)  always rise during inflation. 
D)  are guaranteed by the federal government. 
A)  are more likely to be fixed. 
B)  are more likely to be variable. 
C)  always rise during inflation. 
D)  are guaranteed by the federal government. B

Question 2

To measure how productive workers in the economy are,the best measure to use would be

Accepted Answer

A)  real GDP. 
B)  GDP divided by the population. 
C)  GDP divided by the nation's capital stock. 
D)  GDP divided by hours worked. 
A)  real GDP. 
B)  GDP divided by the population. 
C)  GDP divided by the nation's capital stock. 
D)  GDP divided by hours worked. D

Question 3

Explain how the current U.S.tax system levies taxes on capital gains and earned interest.What does this mean for the costs of inflation?

Accepted Answer

The U.S.tax system levies taxes on nominal interest earned and on capital gains earned from investment in financial assets.Specifically,the government collects a certain percentage of nominal interest and capital gains earned by households and businesses.Nominal interest rates are the interest rates stated in a loan contract.Economists explain that the t cost of lending and borrowing is the real interest rate.The real interest rate is the nominal interest rate minus the rate of inflation.This correction for inflation makes the real interest rate a more accurate measure of the transfer of purchasing power between the borrower and the lender.If the government collects a certain percentage of nominal interest earned,then,during periods of high inflation,nominal interest earned may increase,even if real interest earned does not.Similarly,when the inflation rate is high,prices of financial assets rise to keep pace with the rising prices of goods and services.While an investor may earn a capital gain in nominal terms,he or she may earn no gain in real terms.Since the government collects a percentage of the nominal capital gain,the investor is made worse off by high inflation.The tax system limits the amount of funds savers are willing to lend and invest in financial assets during periods of high inflation,limiting the funds available for investment in physical capital.This reduction in funds available for investment would slow down production of capital goods and could hinder technical progress that is often made possible by new investment.

Question 4

If economic output is increased by increasing the number of people working in the economy,then

Accepted Answer

A)  both GDP per capita and labor productivity will increase. 
B)  both GDP per capita and labor productivity will decrease. 
C)  GDP per capita will increase. 
D)  Labor productivity will increase. 
A)  both GDP per capita and labor productivity will increase. 
B)  both GDP per capita and labor productivity will decrease. 
C)  GDP per capita will increase. 
D)  Labor productivity will increase.

Question 5

Older people often reminisce about the "good old days" when prices were much lower.This is misplaced nostalgia primarily because in the "good old days,"

Accepted Answer

A)  prices were not really that low. 
B)  wages were much lower also. 
C)  people worked longer hours. 
D)  people had more leisure time. 
A)  prices were not really that low. 
B)  wages were much lower also. 
C)  people worked longer hours. 
D)  people had more leisure time.

Question 6

Sharon buys some common stock in 1990 for $10,000 and sells it in 2000 for $15,000.During the same period,prices have risen by 75 percent.The net result of Sharon's stock purchases is that she will

Accepted Answer

A)  pay no taxes because she earned negative real capital gains. 
B)  lose purchasing power and have to pay taxes anyway. 
C)  earn a real capital gain of $5,000 plus 75 percent. 
D)  earn a real capital gain of $15,000 minus 75 percent. 
A)  pay no taxes because she earned negative real capital gains. 
B)  lose purchasing power and have to pay taxes anyway. 
C)  earn a real capital gain of $5,000 plus 75 percent. 
D)  earn a real capital gain of $15,000 minus 75 percent.

Question 7

When governments rapidly increase the supply of money,the usual result is

Accepted Answer

A)  deflation. 
B)  low inflation. 
C)  hyperinflation. 
D)  increasing long-term investment. 
A)  deflation. 
B)  low inflation. 
C)  hyperinflation. 
D)  increasing long-term investment.

Question 8

The public often overestimates the negative effects of inflation due to a focus on nominal rates of interest.

Accepted Answer

A) True 
 B)False

Question 9

In 2009,which of the following countries had the lowest average unemployment rates?

Accepted Answer

A)  Canada 
B)  France 
C)  Italy 
D)  Germany 
E)  United States 
A)  Canada 
B)  France 
C)  Italy 
D)  Germany 
E)  United States

Question 10

If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return,then we should expect

Accepted Answer

A)  increased investment by the utility. 
B)  expansion of electric power generating capacity. 
C)  future power shortages. 
D)  excess investment by the electric utility. 
A)  increased investment by the utility. 
B)  expansion of electric power generating capacity. 
C)  future power shortages. 
D)  excess investment by the electric utility.

Question 11

What is a GDP deflator Why do some economists consider the GDP deflator to be a better measure of overall inflation than the Consumer Price Index?

Accepted Answer

The price index used to deflate nominal

Question 12

If the capital stock decreases,then the economy will produce ____ output with the ____ amount of labor.

Accepted Answer

A)  same, same 
B)  less, same 
C)  more, same 
D)  more, decreased 
A)  same, same 
B)  less, same 
C)  more, same 
D)  more, decreased

Question 13

According to economists,one of the signs of an unhealthy economy is a(n)

Accepted Answer

A)  rising labor productivity. 
B)  increasing real GDP. 
C)  declining real GDP. 
D)  declining unemployment. 
A)  rising labor productivity. 
B)  increasing real GDP. 
C)  declining real GDP. 
D)  declining unemployment.

Question 14

Which of the following groups would most likely be harmed by inflation?

Accepted Answer

A)  workers 
B)  borrowers 
C)  debtors 
D)  retirees 
A)  workers 
B)  borrowers 
C)  debtors 
D)  retirees

Question 15

The relationship between industrial capacity percentage and

Accepted Answer

A)  the unemployment rate is indirect. 
B)  the unemployment rate is direct. 
C)  real GDP is indirect. 
D)  nominal GDP is indirect. 
A)  the unemployment rate is indirect. 
B)  the unemployment rate is direct. 
C)  real GDP is indirect. 
D)  nominal GDP is indirect.

Question 16

Inflation often bestows unearned income on

Accepted Answer

A)  homeowners. 
B)  lenders. 
C)  creditors. 
D)  fixed income receivers. 
A)  homeowners. 
B)  lenders. 
C)  creditors. 
D)  fixed income receivers.

Question 17

If the rate of technical progress decreases,then the growth

Accepted Answer

A)  of the labor force will decrease. 
B)  of the capital stock will decrease. 
C)  rate of potential GDP will decrease. 
D)  rate of unemployment will decrease. 
A)  of the labor force will decrease. 
B)  of the capital stock will decrease. 
C)  rate of potential GDP will decrease. 
D)  rate of unemployment will decrease.

Question 18

Some economists believe that technological progress could be increased if the federal government

Accepted Answer

A)  nationalized research facilities. 
B)  levied taxes on nominal capital gains. 
C)  levied taxes on real capital gains. 
D)  levied taxes on gross rather than net investment. 
A)  nationalized research facilities. 
B)  levied taxes on nominal capital gains. 
C)  levied taxes on real capital gains. 
D)  levied taxes on gross rather than net investment.

Question 19

Labor productivity times hours of work equals

Accepted Answer

A)  per capita GDP. 
B)  capital stock. 
C)  population. 
D)  GDP. 
A)  per capita GDP. 
B)  capital stock. 
C)  population. 
D)  GDP.

Question 20

Over the past few decades,nominal interest rates have been higher than real rates of interest.This means that

Accepted Answer

A)  lenders must have expected inflation. 
B)  borrowers must have expected deflation. 
C)  lenders must have expected prices to fall. 
D)  borrowers must have expected prices to fall. 
A)  lenders must have expected inflation. 
B)  borrowers must have expected deflation. 
C)  lenders must have expected prices to fall. 
D)  borrowers must have expected prices to fall.

Workers are generally in a better position to protect themselves from inflation in comparison to retired persons because workers' incomes

To measure how productive workers in the economy are,the best measure to use would be

Explain how the current U.S.tax system levies taxes on capital gains and earned interest.What does this mean for the costs of inflation?

If economic output is increased by increasing the number of people working in the economy,then

Older people often reminisce about the "good old days" when prices were much lower.This is misplaced nostalgia primarily because in the "good old days,"

Sharon buys some common stock in 1990 for $10,000 and sells it in 2000 for $15,000.During the same period,prices have risen by 75 percent.The net result of Sharon's stock purchases is that she will

When governments rapidly increase the supply of money,the usual result is

The public often overestimates the negative effects of inflation due to a focus on nominal rates of interest.

In 2009,which of the following countries had the lowest average unemployment rates?

If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return,then we should expect

What is a GDP deflator Why do some economists consider the GDP deflator to be a better measure of overall inflation than the Consumer Price Index?

If the capital stock decreases,then the economy will produce output with the amount of labor.

According to economists,one of the signs of an unhealthy economy is a(n)

Which of the following groups would most likely be harmed by inflation?

The relationship between industrial capacity percentage and

Inflation often bestows unearned income on

If the rate of technical progress decreases,then the growth

Some economists believe that technological progress could be increased if the federal government

Labor productivity times hours of work equals

Over the past few decades,nominal interest rates have been higher than real rates of interest.This means that

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters

Exam 6: The Goals of Macroeconomic Policy

Workers are generally in a better position to protect themselves from inflation in comparison to retired persons because workers' incomes

To measure how productive workers in the economy are,the best measure to use would be

Explain how the current U.S.tax system levies taxes on capital gains and earned interest.What does this mean for the costs of inflation?

If economic output is increased by increasing the number of people working in the economy,then

Older people often reminisce about the "good old days" when prices were much lower.This is misplaced nostalgia primarily because in the "good old days,"

Sharon buys some common stock in 1990 for $10,000 and sells it in 2000 for $15,000.During the same period,prices have risen by 75 percent.The net result of Sharon's stock purchases is that she will

When governments rapidly increase the supply of money,the usual result is

The public often overestimates the negative effects of inflation due to a focus on nominal rates of interest.

In 2009,which of the following countries had the lowest average unemployment rates?

If expected inflation is 12 percent and the publicly regulated electric utility company is legally limited to a 10 percent rate of return,then we should expect

What is a GDP deflator Why do some economists consider the GDP deflator to be a better measure of overall inflation than the Consumer Price Index?

If the capital stock decreases,then the economy will produce ____ output with the ____ amount of labor.

According to economists,one of the signs of an unhealthy economy is a(n)

Which of the following groups would most likely be harmed by inflation?

The relationship between industrial capacity percentage and

Inflation often bestows unearned income on

If the rate of technical progress decreases,then the growth

Some economists believe that technological progress could be increased if the federal government

Labor productivity times hours of work equals

Over the past few decades,nominal interest rates have been higher than real rates of interest.This means that

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

An Introduction to Macroeconomics

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters

If the capital stock decreases,then the economy will produce output with the amount of labor.