Question 1

What is Eswatini's real GDP if its nominal GDP is $4.7 billion (in current US$) and the GDP deflator is 147.5?

Accepted Answer

A) $3.2 billion 
B) $4.7 billion 
C) $2.8 billion 
D) $6.9 billion 
A) $3.2 billion 
B) $4.7 billion 
C) $2.8 billion 
D) $6.9 billion

Question 2

Consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the value of the basket in 2016?

Accepted Answer

A) $5,737 
B) $100 
C) $1,337 
D) $1,400 
A) $5,737 
B) $100 
C) $1,337 
D) $1,400

Question 3

(Table: The Consumer Price Index (CPI)) The inflation rate between 2011 and 2012 was _____. $
\text { Table: The Consumer Price Index (CPI) } \
\begin{array} { | l | l | } 
\hline \text { February 2009 } & 212.2 \
\hline \text { February 2010 } & 216.7 \
\hline \text { February } 2011 & 221.6 \
\hline \text { February } 2012 & 224.6 \
\hline
\end{array}$

Accepted Answer

A) 10%. 
B) 10% 
C) 3.7%. 
D) 3.7% 
E) 1.4%.
F)1.4%
G)24.6%.
H)24.6% 
A) 10%. 
B) 10% 
C) 3.7%. 
D) 3.7% 
E) 1.4%.
F)1.4%
G)24.6%.
H)24.6%

Question 4

In January of this year, Lorina opens an investment account that has a nominal interest rate of 3.8%. The consumer price index in January was 211.93 and is expected to go to 213.21 in a year. Suppose that the consumer price index actually turns out to be 209.75 in a year. Based on this information, answer the following questions.
(a) What is the expected rate of inflation over the year?
(b) What is Lorina's expected real interest rate?
(c) What is Lorina's actual real rate of interest?

Accepted Answer

The answer of In January of this year, Lorina opens...

Question 5

Shoe-leather costs of inflation are the costs:

Accepted Answer

A) incurred when purchasing new footwear. 
B) of lost interest on savings accounts. 
C) of adjusting prices. 
D) incurred while trying to avoid holding cash. 
A) incurred when purchasing new footwear. 
B) of lost interest on savings accounts. 
C) of adjusting prices. 
D) incurred while trying to avoid holding cash.

Question 6

Why should you avoid holding cash during periods of high inflation?

Accepted Answer

A) The cash loses value as prices keep rising. 
B) You want to avoid making any interest on the money. 
C) Banks become unsafe during periods of high inflation. 
D) You want to ensure that the money does not lose value. 
A) The cash loses value as prices keep rising. 
B) You want to avoid making any interest on the money. 
C) Banks become unsafe during periods of high inflation. 
D) You want to ensure that the money does not lose value.

Question 7

You open an investment account that earns a nominal interest rate of 4.2% a year. The current consumer price index is 108. In one year, the consumer price index is expected to go to 112. What is your expected real rate of return?

Accepted Answer

A) -0.5% 
B) 4.2% 
C) 0.5% 
D) 3.7% 
A) -0.5% 
B) 4.2% 
C) 0.5% 
D) 3.7%

Question 8

What is Nicaragua's GDP deflator if its nominal GDP is $13.118 billion (in current US$) and the real GDP is $5.676 billion?

Accepted Answer

A) 43.27 
B) 231.1 
C) 100 
D) 113.1 
A) 43.27 
B) 231.1 
C) 100 
D) 113.1

Question 9

The table shows nominal GDP data and real GDP data. Use this data to answer the following questions.
 $$\begin{array} { | c | c | c | } 
\hline \text { YEAR } & \begin{array} { c } 
\text { NOMINAL GDP } \
\text { (BILLIONS) }
\end{array} & \begin{array} { c } 
\text { REAL GDP } \
\text { (BILLIONS) }
\end{array} \
\hline 1980 & 47.96 & 43.91 \
\hline 1981 & 53.99 & 49.38 \
\hline 1982 & 71.15 & 59.88 \
\hline 1983 & 76.45 & 64.25 \
\hline 1984 & 82.67 & 77.14 \
\hline
\end{array}$$ ​
(a) What was the GDP deflator in 1980?
(b) What was the GDP deflator in 1982?
(c) What was the GDP deflator in 1984?

Accepted Answer

The answer of The table shows nominal GDP data and...

Question 10

(Table: Peanut Butter and Jelly Prices) Use Table: Peanut Butter and Jelly Prices. Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. If 2017 is the base year, what is the value of the price index in 2018? $$\begin{array} { | l | l | l | l | } 
\hline & \text { Price in 2017 } & \text { Price in 2018 } & \text { Price in 2019 } \
\hline \text { Peanut butter } & \$ 1.00 & \$ 1.10 & \$ 1.20 \
\hline \text { Jelly } & \$ 2.00 & \$ 2.25 & \$ 2.50 \
\hline
\end{array}$$

Accepted Answer

A) 0 
B) 0. 
C) 90 
D) 90. 
E) 100.
F)100
G)111.25.
H)111.25 
A) 0 
B) 0. 
C) 90 
D) 90. 
E) 100.
F)100
G)111.25.
H)111.25

Question 11

You can hedge against inflation by investing in:

Accepted Answer

A) housing. 
B) art. 
C) cash. 
D) inflation-indexed bonds. 
A) housing. 
B) art. 
C) cash. 
D) inflation-indexed bonds.

Question 12

The producer price index is regarded as a warning sign of inflation because:

Accepted Answer

A) prices of inputs will ultimately be reflected in prices of final products. 
B) prices of inputs will ultimately be reflected in prices of final products 
C) producers are likely to have monopoly control over prices. 
D) producers are likely to have monopoly control over prices 
E) consumers have to pay the prices charged
F)consumers have to pay the prices charged.
G)commodity producers can sell whatever they want at higher prices
H)commodity producers can sell whatever they want at higher prices. 
A) prices of inputs will ultimately be reflected in prices of final products. 
B) prices of inputs will ultimately be reflected in prices of final products 
C) producers are likely to have monopoly control over prices. 
D) producers are likely to have monopoly control over prices 
E) consumers have to pay the prices charged
F)consumers have to pay the prices charged.
G)commodity producers can sell whatever they want at higher prices
H)commodity producers can sell whatever they want at higher prices.

Question 13

Suppose the basket of goods that you purchase in 2019 consists of five textbooks, three jackets, one pair of winter boots, and four pairs of socks. In 2019, each textbook was $105, each jacket was $75, the pair of winter boots was $90, and each pair of socks was $3. Now suppose in 2020, you purchase the same basket: each textbook costs $97.50, each jacket costs $79, the pair of winter boots is $90, and each pair of socks is $2.50.
(a) What is the cost of the basket in 2019?
(b) What is the cost of the basket in 2020?
(c) What is the rate of inflation or deflation during in 2020?

Accepted Answer

The answer of Suppose the basket of goods that you...

Question 14

The consumer price index is an index that tracks the:

Accepted Answer

A) price that businesses pay over time for the inputs used in the production process. 
B) average price that consumers pay over time for a representative basket of goods and services. 
C) highest prices consumers pay over time for imported goods and services. 
D) price of all goods and services produced domestically. 
A) price that businesses pay over time for the inputs used in the production process. 
B) average price that consumers pay over time for a representative basket of goods and services. 
C) highest prices consumers pay over time for imported goods and services. 
D) price of all goods and services produced domestically.

Question 15

The CPI changes from 100 to 90. This means that:

Accepted Answer

A) the base year index has been changed to 90. 
B) 90% of all prices have fallen. 
C) consumers now purchased 10% fewer goods due to inflation. 
D) there is deflation. 
A) the base year index has been changed to 90. 
B) 90% of all prices have fallen. 
C) consumers now purchased 10% fewer goods due to inflation. 
D) there is deflation.

Question 16

The real interest rate is the:

Accepted Answer

A) stated interest rate without a correction for inflation. 
B) interest rate in terms of changes in purchasing power. 
C) stated interest rate without a correction for deflation. 
D) interest rate after taxes are deducted. 
A) stated interest rate without a correction for inflation. 
B) interest rate in terms of changes in purchasing power. 
C) stated interest rate without a correction for deflation. 
D) interest rate after taxes are deducted.

Question 17

The table shows consumer price index data for the United States. In which year did deflation occur?
$$\begin{array}{l}
\text { U.S. CONSUMER PRICE INDEX }\
\begin{array} { | c | c | } 
\hline \text { YEAR } & \begin{array} { c } 
\text { CONSUMER } \
\text { PRICE INDEX }
\end{array} \
\hline 2005 & 195.27 \
\hline 2006 & 201.56 \
\hline 2007 & 207.34 \
\hline 2008 & 215.25 \
\hline 2009 & 214.57 \
\hline 2010 & 218.08 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) 2006 
B) 2007 
C) 2008 
D) 2009 
A) 2006 
B) 2007 
C) 2008 
D) 2009

Question 18

In January 2008, you purchased a financial instrument with a nominal interest rate of 2.75% per year. At the time, the consumer price index was 212.17. By January 2009, the consumer price index went to 211.93. What was your real rate of interest?

Accepted Answer

The answer of In January 2008, you purchased a financial...

Exam 24: Inflation and Money

What is Eswatini's real GDP if its nominal GDP is $4.7 billion (in current US$) and the GDP deflator is 147.5?

Shoe-leather costs of inflation are the costs:

Why should you avoid holding cash during periods of high inflation?

You open an investment account that earns a nominal interest rate of 4.2% a year. The current consumer price index is 108. In one year, the consumer price index is expected to go to 112. What is your expected real rate of return?

What is Nicaragua's GDP deflator if its nominal GDP is $13.118 billion (in current US$) and the real GDP is $5.676 billion?

You can hedge against inflation by investing in:

The producer price index is regarded as a warning sign of inflation because:

The consumer price index is an index that tracks the:

The CPI changes from 100 to 90. This means that:

The real interest rate is the:

The table shows consumer price index data for the United States. In which year did deflation occur? U.S. CONSUMER PRICE INDEX YEAR CONSUMER PRICE INDEX 2005 195.27 2006 201.56 2007 207.34 2008 215.25 2009 214.57 2010 218.08

In January 2008, you purchased a financial instrument with a nominal interest rate of 2.75% per year. At the time, the consumer price index was 212.17. By January 2009, the consumer price index went to 211.93. What was your real rate of interest?

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