Question 1

Deflation is a:

Accepted Answer

A) rise in the economic growth rate. 
B) decrease in the overall level of prices. 
C) fall in the quality of a product. 
D) rise in the overall level of prices. 
A) rise in the economic growth rate. 
B) decrease in the overall level of prices. 
C) fall in the quality of a product. 
D) rise in the overall level of prices. B

Question 2

What is the GDP deflator if nominal GDP is $300 billion and real GDP is also $300 billion?

Accepted Answer

A) 100 
B) 0 
C) 50 
D) 300 
A) 100 
B) 0 
C) 50 
D) 300 A

Question 3

For each of the following scenarios, identify the function of money that is being illustrated.
(a) Fontana wants to sell her old car. She attaches a lot of sentimental value to the car and therefore prices it at $15,000.
(b) Fred walks into a store and purchases a tin of shoe polish for $2.99.
(c) Terrence opens a savings account with $2,500.

Accepted Answer

(a) unit of account;
(b) medium of exchange; 
(c) store of value

Question 4

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1993?
$$\begin{array}{l}
\text { U.S. CONSUMER PRICE INDEX }\
\begin{array} { | c | c | } 
\hline \text { YEAR } & \begin{array} { c } 
\text { CONSUMER } \
\text { PRICE INDEX }
\end{array} \
\hline 1990 & 130.66 \
\hline 1991 & 136.17 \
\hline 1992 & 140.31 \
\hline 1993 & 144.48 \
\hline 1994 & 148.23 \
\hline 1995 & 152.38 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) 3.04% 
B) 2.79% 
C) 2.97% 
D) 4.22% 
A) 3.04% 
B) 2.79% 
C) 2.97% 
D) 4.22%

Question 5

In 1989, a four-year college degree would set you back $26,902. The consumer price index was 123.94 in January 1989. If the current consumer price index is 251.1, what is the cost of the four-year degree in current dollars?

Accepted Answer

A) $13,278.51 
B) $26,902 
C) $41,224.41 
D) $54,502.92 
A) $13,278.51 
B) $26,902 
C) $41,224.41 
D) $54,502.92

Question 6

What is Belgium's real GDP if its nominal GDP is $532 billion (in current US$) and the GDP deflator is 119.9?

Accepted Answer

A) $532 billion 
B) $443.7 billion 
C) $633 billion 
D) $398 billion 
A) $532 billion 
B) $443.7 billion 
C) $633 billion 
D) $398 billion

Question 7

If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about:

Accepted Answer

A) 5.26%. 
B) 5.26% 
C) 5.56%. 
D) 5.56% 
E) 6.5%.
F)6.5%
G)10%
H)10%. 
A) 5.26%. 
B) 5.26% 
C) 5.56%. 
D) 5.56% 
E) 6.5%.
F)6.5%
G)10%
H)10%.

Question 8

In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars?

Accepted Answer

A) $18,865 
B) $7,799 
C) $12,130 
D) $16,259 
A) $18,865 
B) $7,799 
C) $12,130 
D) $16,259

Question 9

The table shows consumer price index data for the United Kingdom. Which year was the base year for this index?
UK CONSUMER 
PRICE INDEX
$\begin{array} { | l | l | } 
\hline YEAR & CPI \
\hline 2013 & 98.2 \
\hline 2014 & 99.6 \
\hline 2015 & 100 \
\hline 2016 & 101 \
\hline 2017 & 103.6 \
\hline 2018 & 106 \
\hline
\end{array}$

Accepted Answer

A) 2014 
B) 2015 
C) 2016 
D) 2017 
A) 2014 
B) 2015 
C) 2016 
D) 2017

Question 10

Which of the following correctly shows the steps needed to calculate the inflation rate?

Accepted Answer

A) Find the total value of the basket of goods and services, assess quality changes from one period to the next, and measure the inflation rate. 
B) Tally up the cost of the basket of goods and services, subtract the value of goods and services that are no longer counted in the basket, and then calculate the inflation rate. 
C) Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate. 
D) Collect prices from the stores where people shop, assess the substitution that people make from low inflation to high inflation products, and calculate the difference in the prices that people pay. 
A) Find the total value of the basket of goods and services, assess quality changes from one period to the next, and measure the inflation rate. 
B) Tally up the cost of the basket of goods and services, subtract the value of goods and services that are no longer counted in the basket, and then calculate the inflation rate. 
C) Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate. 
D) Collect prices from the stores where people shop, assess the substitution that people make from low inflation to high inflation products, and calculate the difference in the prices that people pay.

Question 11

You open a savings account that pays 0.75% interest a year. What is your real rate of return if the inflation rate is 1%?

Accepted Answer

A) -0.25% 
B) -0.75% 
C) 1% 
D) 1.75% 
A) -0.25% 
B) -0.75% 
C) 1% 
D) 1.75%

Question 12

What is Costa Rica's GDP deflator if its nominal GDP is $60.13 billion (in current US$) and the real GDP is $49.17 billion?

Accepted Answer

A) 149.17 
B) 81.77 
C) 100 
D) 122.3 
A) 149.17 
B) 81.77 
C) 100 
D) 122.3

Question 13

(Table: Muffin Price Index) Use Table: Muffin Price Index. A college town has many small coffee shops, and they all sell muffins. In your economics class, you have been assigned the task of constructing a muffin price index (MPI). The base year is 2017. Use these data to compute the MPI for each year.
​
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Muffin } & \text { 2017 Quantities } & \text { 2017 Prices } & \text { 2018 Prices } & \text { 2019 Prices } \
\hline \text { Banana nut } & 4 & \$ 1.10 & \$ 1.15 & \$ 1.25 \
\hline \text { Pumpkin spice } & 1 & \$ 1.10 & \$ 1.10 & \$ 1.20 \
\hline \text { Blueberry } & 2 & \$ 1.25 & \$ 1.45 & \$ 1.50 \
\hline
\end{array}$$

Accepted Answer

The answer of (Table: Muffin Price Index) Use Table: Muffin...

Question 14

You purchase a certificate of deposit and expect an inflation rate of 1.5% over the next year. Your nominal rate of interest is 2.25%. What is your expected real rate of return?

Accepted Answer

A) 2.25% 
B) 0.75% 
C) -0.75% 
D) 3.75% 
A) 2.25% 
B) 0.75% 
C) -0.75% 
D) 3.75%

Question 15

The table shows consumer price index data for the United Kingdom. In which year was the inflation rate the highest?
UK CONSUMER 
PRICE INDEX
$\begin{array} { | l | l | } 
\hline YEAR & CPI \
\hline 2013 & 98.2 \
\hline 2014 & 99.6 \
\hline 2015 & 100 \
\hline 2016 & 101 \
\hline 2017 & 103.6 \
\hline 2018 & 106 \
\hline
\end{array}$

Accepted Answer

A) 2014 
B) 2015 
C) 2016 
D) 2017 
A) 2014 
B) 2015 
C) 2016 
D) 2017

Question 16

Each month, Lydia typically purchases 12 sodas, seven hot-dogs, five ice-cream cones, eight salads, and four roast chickens. Two years ago, Lydia paid $1.50 for each soda, $2.50 for each hot-dog, $4 for each ice-cream cone, $9 for each salad, and $7.99 for each roast chicken. Today, Lydia pays $1.75 for each soda, $3 for each hot dog, $4.50 for each ice-cream, $9 for each salad, and $8.99 for each roast chicken.
(a) How much did Lydia's purchases cost her two years ago?
(b) How much is Lydia paying for her purchases today?
(c) How much inflation or deflation is Lydia experiencing?

Accepted Answer

The answer of Each month, Lydia typically purchases 12 sodas,...

Question 17

If the consumer price index is 148.3 for 2018 and 152.5 for 2019, what was the inflation rate between these two years?

Accepted Answer

A) 0.97% 
B) 0.97%. 
C) 2.83% 
D) 2.83%. 
E) 4.20%
F)4.20%.
G)9.72%
H)9.72%. 
A) 0.97% 
B) 0.97%. 
C) 2.83% 
D) 2.83%. 
E) 4.20%
F)4.20%.
G)9.72%
H)9.72%.

Question 18

Consider the following basket of goods: 15 lollipops, 10 bars of chocolate, four jars of peanut butter, and two ice-cream cakes. Suppose that in 1999, each lollipop was 10 cents, each bar of chocolate was $1.50, each jar of peanut butter was $2.50, and each ice-cream cake was $7.99. In 2018, each lollipop was 80 cents, each bar of chocolate was $3.75, each jar of peanut butter was $4.25, and each ice-cream cake was 12.99. What was the value of the basket in 1999?

Accepted Answer

A) $117.70 
B) $42.48 
C) $92.48 
D) $217.70 
A) $117.70 
B) $42.48 
C) $92.48 
D) $217.70

Question 19

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs _____ frequently than they did before. This is an example of _____ costs.

Accepted Answer

A) more; menu. 
B) more; menu 
C) less; menu. 
D) less; menu 
E) more; unit-of-account.
F)more; unit-of-account
G)less; unit-of-account
H)less; unit-of-account. 
A) more; menu. 
B) more; menu 
C) less; menu. 
D) less; menu 
E) more; unit-of-account.
F)more; unit-of-account
G)less; unit-of-account
H)less; unit-of-account.

Question 20

What are two reasons that the consumer price index (CPI) overstates inflation?

Accepted Answer

The answer of What are two reasons that the consumer...

Exam 24: Inflation and Money

Deflation is a:

What is the GDP deflator if nominal GDP is $300 billion and real GDP is also $300 billion?

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1993? U.S. CONSUMER PRICE INDEX YEAR CONSUMER PRICE INDEX 1990 130.66 1991 136.17 1992 140.31 1993 144.48 1994 148.23 1995 152.38

In 1989, a four-year college degree would set you back $26,902. The consumer price index was 123.94 in January 1989. If the current consumer price index is 251.1, what is the cost of the four-year degree in current dollars?

What is Belgium's real GDP if its nominal GDP is $532 billion (in current US$) and the GDP deflator is 119.9?

If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about:

In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars?

The table shows consumer price index data for the United Kingdom. Which year was the base year for this index? UK CONSUMER PRICE INDEX YEAR CPI 2013 98.2 2014 99.6 2015 100 2016 101 2017 103.6 2018 106

Which of the following correctly shows the steps needed to calculate the inflation rate?

You open a savings account that pays 0.75% interest a year. What is your real rate of return if the inflation rate is 1%?

What is Costa Rica's GDP deflator if its nominal GDP is $60.13 billion (in current US$) and the real GDP is $49.17 billion?

You purchase a certificate of deposit and expect an inflation rate of 1.5% over the next year. Your nominal rate of interest is 2.25%. What is your expected real rate of return?

The table shows consumer price index data for the United Kingdom. In which year was the inflation rate the highest? UK CONSUMER PRICE INDEX YEAR CPI 2013 98.2 2014 99.6 2015 100 2016 101 2017 103.6 2018 106

If the consumer price index is 148.3 for 2018 and 152.5 for 2019, what was the inflation rate between these two years?

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs _____ frequently than they did before. This is an example of _____ costs.

What are two reasons that the consumer price index (CPI) overstates inflation?

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

Elasticity: Measuring Responsiveness

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Externalities and Public Goods

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Entry, Exit, and Long-Run Profitability

Business Strategy

Sophisticated Pricing Strategies

Game Theory and Strategic Choices

Decisions Involving Uncertainty

Decisions With Private Information

Sizing up the Economy Using Gdp

Economic Growth

Unemployment

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

The Fed Model: Linking Interest Rates, Output, and Inflation

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

Filters

During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs _ frequently than they did before. This is an example of _ costs.