Question 1

Menu costs are the:

Accepted Answer

A) costs of producing restaurant meals. 
B) variety of costs that cause producers to change their prices. 
C) marginal costs of adjusting prices. 
D) total costs of producing goods and services. 
A) costs of producing restaurant meals. 
B) variety of costs that cause producers to change their prices. 
C) marginal costs of adjusting prices. 
D) total costs of producing goods and services.

Question 2

In January of this year, you take a loan of $15,000, and the bank (expecting an inflation rate of 2%) asks you to pay an interest rate of 7% per year.
(a) Suppose that the actual inflation rate turns out to be 4%. Who gains and who loses?
(b) Suppose that the actual inflation rate turns out to be 1%. Who gains and who loses?

Accepted Answer

The answer of In January of this year, you take...

Question 3

In Monaco, a market basket of goods and services cost $130 in 2017, $140 in 2018, and $160 in 2019. Based on this information and considering 2017 as the base year, inflation from 2017 to 2019 was:

Accepted Answer

A) 7.14%. 
B) 7.14% 
C) 7.69% 
D) 7.69%. 
E) 14.28%.
F)14.28%
G)23.07%
H)23.07%. 
A) 7.14%. 
B) 7.14% 
C) 7.69% 
D) 7.69%. 
E) 14.28%.
F)14.28%
G)23.07%
H)23.07%.

Question 4

Many payments made by the U.S. government-such as Social Security payments-are tied to the consumer price index. To the extent that the index is biased upward, use of the CPI:

Accepted Answer

A) leads to lower benefits. 
B) leads to lower benefits 
C) raises government expenditures 
D) raises government expenditures. 
E) lowers government expenditures
F)lowers government expenditures.
G)prevents benefit recipients from profiting unfairly from these programs
H)prevents benefit recipients from profiting unfairly from these programs. 
A) leads to lower benefits. 
B) leads to lower benefits 
C) raises government expenditures 
D) raises government expenditures. 
E) lowers government expenditures
F)lowers government expenditures.
G)prevents benefit recipients from profiting unfairly from these programs
H)prevents benefit recipients from profiting unfairly from these programs.

Question 5

Which of the following scenarios shows evidence of inflation?

Accepted Answer

A) The economic growth rate in a country increases significantly. 
B) The United Kingdom experiences a recession. 
C) Watermelons are labeled "Buy one, get one free" at the local grocery. 
D) The average house price in an economy rises. 
A) The economic growth rate in a country increases significantly. 
B) The United Kingdom experiences a recession. 
C) Watermelons are labeled "Buy one, get one free" at the local grocery. 
D) The average house price in an economy rises.

Question 6

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is:

Accepted Answer

A) understated inflation. 
B) the failure to capture real variables versus nominal variables. 
C) substitution bias. 
D) quality bias. 
A) understated inflation. 
B) the failure to capture real variables versus nominal variables. 
C) substitution bias. 
D) quality bias.

Question 7

What steps would you follow if you wanted to figure out the inflation rate between one year and the next?

Accepted Answer

The answer of What steps would you follow if you...

Question 8

_____ costs may be especially important in the tax system when inflation distorts the measures of income on which taxes are collected.

Accepted Answer

A) Unit-of-account 
B) Unit-of-account. 
C) Menu 
D) Menu. 
E) Shoe-leather
F)Shoe-leather.
G)Inflation fallacy
H)Inflation fallacy. 
A) Unit-of-account 
B) Unit-of-account. 
C) Menu 
D) Menu. 
E) Shoe-leather
F)Shoe-leather.
G)Inflation fallacy
H)Inflation fallacy.

Question 9

In 1971, when the consumer price index was 40.48, women earned a median income of $2,408 per year. If the consumer price index in 2012 was 229.6, how much was $2,408 in 2012 dollars?

Accepted Answer

A) $2,408 
B) $13,658 
C) $29,076 
D) $425 
A) $2,408 
B) $13,658 
C) $29,076 
D) $425

Question 10

The table shows consumer price index data for the United States. In which year was the inflation rate the highest?
$$\begin{array}{l}
\text { U.S. CONSUMER PRICE INDEX }\
\begin{array} { | c | c | } 
\hline \text { YEAR } & \begin{array} { c } 
\text { CONSUMER } \
\text { PRICE INDEX }
\end{array} \
\hline 1990 & 130.66 \
\hline 1991 & 136.17 \
\hline 1992 & 140.31 \
\hline 1993 & 144.48 \
\hline 1994 & 148.23 \
\hline 1995 & 152.38 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) 1991 
B) 1992 
C) 1993 
D) 1994 
A) 1991 
B) 1992 
C) 1993 
D) 1994

Question 11

The real interest rate is the:

Accepted Answer

A) percentage of the nominal interest that is inflation. 
B) economic growth rate adjusted for the effects of inflation. 
C) nominal interest rate plus the rate of inflation. 
D) nominal interest rate minus the rate of inflation. 
A) percentage of the nominal interest that is inflation. 
B) economic growth rate adjusted for the effects of inflation. 
C) nominal interest rate plus the rate of inflation. 
D) nominal interest rate minus the rate of inflation.

Question 12

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 rate of inflation between 1999 and 2018?

Accepted Answer

A) 117.7% 
B) 17.7% 
C) 217.7% 
D) 7.7% 
A) 117.7% 
B) 17.7% 
C) 217.7% 
D) 7.7%

Question 13

In 2001, the movie The Lord of the Rings: The Fellowship of the Ring made about $47 million in its opening weekend. In 2003, The Lord of the Rings: Return of the King made about $73 million in its opening weekend. The consumer price index in 2001 was 177.1. If the consumer price index in 2003 was 184, how much did The Lord of the Rings: The Fellowship of the Ring movie make in 2003 dollars?

Accepted Answer

The answer of In 2001, the movie The Lord of...

Question 14

In a basket of goods and services like CPI:

Accepted Answer

A) the quantities of goods and service are constant, and their prices may change. 
B) the quantities of goods and service are constant, and their prices may change 
C) the quantities of goods and services may change, and their prices are constant 
D) the quantities of goods and services may change, and their prices are constant. 
E) both the prices and quantities of goods and services are constant
F)both the prices and quantities of goods and services are constant.
G)both the prices and quantities of goods and services may change
H)both the prices and quantities of goods and services may change. 
A) the quantities of goods and service are constant, and their prices may change. 
B) the quantities of goods and service are constant, and their prices may change 
C) the quantities of goods and services may change, and their prices are constant 
D) the quantities of goods and services may change, and their prices are constant. 
E) both the prices and quantities of goods and services are constant
F)both the prices and quantities of goods and services are constant.
G)both the prices and quantities of goods and services may change
H)both the prices and quantities of goods and services may change.

Question 15

If the price index in year 1 is 146 and 163 in year 2, the rate of inflation between year 1 and year 2 is:

Accepted Answer

A) 8.2%. 
B) 8.2% 
C) 10.43%. 
D) 10.43% 
E) 11.64%
F)11.64%.
G)17.0%
H)17.0%. 
A) 8.2%. 
B) 8.2% 
C) 10.43%. 
D) 10.43% 
E) 11.64%
F)11.64%.
G)17.0%
H)17.0%.

Question 16

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

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 17

(Table: Price Levels) What was the rate of inflation from 2012 to 2013? $$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Table: Price } \
\text { Levels }
\end{array} & \
\hline 2011 & 221.3 \
\hline 2012 & 227.7 \
\hline 2013 & 232.2 \
\hline 2014 & 234.8 \
\hline
\end{array}$$

Accepted Answer

A) 6.4% 
B) 6.4%. 
C) 4.5%. 
D) 4.5% 
E) 2.9%.
F)2.9%
G)2.0%.
H)2.0% 
A) 6.4% 
B) 6.4%. 
C) 4.5%. 
D) 4.5% 
E) 2.9%.
F)2.9%
G)2.0%.
H)2.0%

Question 18

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

Accepted Answer

A) the consumer price index is lower than the producer price index. 
B) the prices of each and every good and service went down. 
C) economic growth also decreased. 
D) on average, prices went down across the economy. 
A) the consumer price index is lower than the producer price index. 
B) the prices of each and every good and service went down. 
C) economic growth also decreased. 
D) on average, prices went down across the economy.

Question 19

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return?

Accepted Answer

A) 0.85% 
B) 1.25% 
C) -0.85% 
D) -2.1% 
A) 0.85% 
B) 1.25% 
C) -0.85% 
D) -2.1%

Question 20

Suppose that a market basket used to construct a university student price index (USPI) consists of 5 textbooks and 100 gallons of gasoline. In 2018, the base year, textbooks cost $100 each, and gasoline costs $2 per gallon. In 2019, textbooks cost $120 each, and gasoline costs $3 per gallon. The USPI for 2019 is:

Accepted Answer

A) 120.4 
B) 120.4. 
C) 900.3 
D) 900.3. 
E) 128.6
F)128.6.
G)707.9
H)707.9. 
A) 120.4 
B) 120.4. 
C) 900.3 
D) 900.3. 
E) 128.6
F)128.6.
G)707.9
H)707.9.

Exam 24: Inflation and Money

Menu costs are the:

In Monaco, a market basket of goods and services cost $130 in 2017, $140 in 2018, and $160 in 2019. Based on this information and considering 2017 as the base year, inflation from 2017 to 2019 was:

Many payments made by the U.S. government-such as Social Security payments-are tied to the consumer price index. To the extent that the index is biased upward, use of the CPI:

Which of the following scenarios shows evidence of inflation?

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is:

What steps would you follow if you wanted to figure out the inflation rate between one year and the next?

_____ costs may be especially important in the tax system when inflation distorts the measures of income on which taxes are collected.

In 1971, when the consumer price index was 40.48, women earned a median income of $2,408 per year. If the consumer price index in 2012 was 229.6, how much was $2,408 in 2012 dollars?

The table shows consumer price index data for the United States. In which year was the inflation rate the highest? 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

The real interest rate is the:

In a basket of goods and services like CPI:

If the price index in year 1 is 146 and 163 in year 2, the rate of inflation between year 1 and year 2 is:

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1991? 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

(Table: Price Levels) What was the rate of inflation from 2012 to 2013? Table: Price Levels 2011 221.3 2012 227.7 2013 232.2 2014 234.8

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return?

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

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