Question 1

The 'real rate' of interest is the:

Accepted Answer

A) nominal interest rate plus the expected inflation rate. 
B) nominal interest rate minus the expected inflation rate. 
C) interest rate determined by the supply and demand in the money market. 
D) nominal interest rate. 
A) nominal interest rate plus the expected inflation rate. 
B) nominal interest rate minus the expected inflation rate. 
C) interest rate determined by the supply and demand in the money market. 
D) nominal interest rate.

Question 2

When does 'deflation' occur?

Accepted Answer

A) When there is a sustained decline in the price level. 
B) When there is a one-time increase in the price level. 
C) When there is a sustained increase in the price level. 
D) When there is a one-time decrease in the price level. 
A) When there is a sustained decline in the price level. 
B) When there is a one-time increase in the price level. 
C) When there is a sustained increase in the price level. 
D) When there is a one-time decrease in the price level.

Question 3

If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years?

Accepted Answer

A) The cost of living has increased by 6%. 
B) The cost of living has increased by 2.9%. 
C) The cost of living has increased by 12.7%. 
D) The cost of living has decreased by 6%. 
A) The cost of living has increased by 6%. 
B) The cost of living has increased by 2.9%. 
C) The cost of living has increased by 12.7%. 
D) The cost of living has decreased by 6%.

Question 4

If nominal wages rise faster than the price level, then real wages have ________ and the purchasing power of income has ________.

Accepted Answer

A) fallen; fallen 
B) fallen; risen 
C) risen; risen 
D) risen; fallen 
A) fallen; fallen 
B) fallen; risen 
C) risen; risen 
D) risen; fallen

Question 5

Inflation redistributes income to a greater extent when the inflation is 'unanticipated'.

Accepted Answer

A) True 
 B)False

Question 6

Looking at the following table, what is the rate of growth of the average price level from 2016 to 2017?

Accepted Answer

A) 1% 
B) 2% 
C) 3% 
D) 5% 
A) 1% 
B) 2% 
C) 3% 
D) 5%

Question 7

Weekly expenditures for a family of four in 2017 averaged $1 500. In 2018, the cost of the same purchases was $1 600. If 2017 is the base year, what was the CPI in 2018?

Accepted Answer

A) 110 
B) 107 
C) 100 
D) 93 
A) 110 
B) 107 
C) 100 
D) 93

Question 8

What is the difference between 'demand-pull inflation' and 'cost-push inflation'?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Demand-pull inflation is caused by an in

Question 9

Assume that between 2017 and 2018, the CPI of a country rose from 182 to 185. If household incomes rose by 3% during that period of time, then which of the following is true?

Accepted Answer

A) The purchasing power of household income fell between 2017 and 2018. 
B) The purchasing power of household income rose between 2017 and 2018. 
C) The purchasing power of household income remained constant between 2017 and 2018. 
D) The CPI cannot be used to determine how the purchasing power of household income changes over time. 
A) The purchasing power of household income fell between 2017 and 2018. 
B) The purchasing power of household income rose between 2017 and 2018. 
C) The purchasing power of household income remained constant between 2017 and 2018. 
D) The CPI cannot be used to determine how the purchasing power of household income changes over time.

Question 10

An increase in real wages shifts the aggregate supply curve to the left, always resulting in cost-push inflation.

Accepted Answer

A) True 
 B)False

Question 11

There are no costs to inflation if it is fully anticipated.

Accepted Answer

A) True 
 B)False

Question 12

Using the following table, calculate the real average wage for 1998 and 2018. Calculate the rate of growth of real average wages from 1998 to 2018. Are workers in this country better off in terms of the purchasing power of a dollar in 1998 or 2018? Explain why.
   
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_____________________________________________________________________________________________

Accepted Answer

The real average wage in 1998 is × 100 =

Question 13

Which of the following is not an economic cost of higher than anticipated inflation?

Accepted Answer

A) Purchasing power of people on fixed incomes will fall. 
B) A person who has borrowed money at a fixed interest rate will be disadvantaged. 
C) Businesses incur costs through having to change prices. 
D) Banks who have loaned out money at a fixed interest rate will be disadvantaged. 
A) Purchasing power of people on fixed incomes will fall. 
B) A person who has borrowed money at a fixed interest rate will be disadvantaged. 
C) Businesses incur costs through having to change prices. 
D) Banks who have loaned out money at a fixed interest rate will be disadvantaged.

Question 14

'Inflation' is an increase in the:

Accepted Answer

A) overall level of economic activity. 
B) rate of growth of GDP. 
C) average hourly wage rate. 
D) general price level in the economy. 
A) overall level of economic activity. 
B) rate of growth of GDP. 
C) average hourly wage rate. 
D) general price level in the economy.

Question 15

What is the result if inflation increases unexpectedly?

Accepted Answer

A) lenders lose 
B) borrowers lose 
C) lenders gain and borrowers gain 
D) neither borrowers nor lenders lose 
A) lenders lose 
B) borrowers lose 
C) lenders gain and borrowers gain 
D) neither borrowers nor lenders lose

Question 16

Looking at the following table, what is the rate of growth of real average hourly earnings from 2016 to 2017?

Accepted Answer

A) 5% 
B) -5% 
C) 15% 
D) -15% 
A) 5% 
B) -5% 
C) 15% 
D) -15%

Question 17

Hyperinflation occurred in Germany after World War I, when its inflation rate rose to 3.25 million per cent.

Accepted Answer

A) True 
 B)False

Question 18

The stated interest rate on a loan is the:

Accepted Answer

A) real interest rate. 
B) nominal interest rate. 
C) actual inflation rate. 
D) expected inflation rate. 
A) real interest rate. 
B) nominal interest rate. 
C) actual inflation rate. 
D) expected inflation rate.

Question 19

What is 'outlet bias'?

Accepted Answer

A) The tendency for households to spend more money over time. 
B) The tendency for households to spend their money at discount stores as prices rise. 
C) The tendency for the quality of products to improve over time, even though the CPI does not measure changes in quality. 
D) The tendency for consumers to purchase newer, more technologically advanced products even though they have higher prices. 
A) The tendency for households to spend more money over time. 
B) The tendency for households to spend their money at discount stores as prices rise. 
C) The tendency for the quality of products to improve over time, even though the CPI does not measure changes in quality. 
D) The tendency for consumers to purchase newer, more technologically advanced products even though they have higher prices.

Question 20

Using the following table, calculate real average hourly earnings for 2016, 2017 and 2018. Calculate the rate of growth of real average hourly earnings from 2017 to 2018.
   
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Real average hourly earnings in 2016 are

The 'real rate' of interest is the:

When does 'deflation' occur?

If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years?

If nominal wages rise faster than the price level, then real wages have and the purchasing power of income has .

Inflation redistributes income to a greater extent when the inflation is 'unanticipated'.

Looking at the following table, what is the rate of growth of the average price level from 2016 to 2017?

Weekly expenditures for a family of four in 2017 averaged $1 500. In 2018, the cost of the same purchases was $1 600. If 2017 is the base year, what was the CPI in 2018?

What is the difference between 'demand-pull inflation' and 'cost-push inflation'? _ _

Assume that between 2017 and 2018, the CPI of a country rose from 182 to 185. If household incomes rose by 3% during that period of time, then which of the following is true?

An increase in real wages shifts the aggregate supply curve to the left, always resulting in cost-push inflation.

There are no costs to inflation if it is fully anticipated.

Using the following table, calculate the real average wage for 1998 and 2018. Calculate the rate of growth of real average wages from 1998 to 2018. Are workers in this country better off in terms of the purchasing power of a dollar in 1998 or 2018? Explain why. _ _

Which of the following is not an economic cost of higher than anticipated inflation?

'Inflation' is an increase in the:

What is the result if inflation increases unexpectedly?

Looking at the following table, what is the rate of growth of real average hourly earnings from 2016 to 2017?

Hyperinflation occurred in Germany after World War I, when its inflation rate rose to 3.25 million per cent.

The stated interest rate on a loan is the:

What is 'outlet bias'?

Using the following table, calculate real average hourly earnings for 2016, 2017 and 2018. Calculate the rate of growth of real average hourly earnings from 2017 to 2018. _ _

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

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Exam 8: Inflation

The 'real rate' of interest is the:

When does 'deflation' occur?

If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years?

If nominal wages rise faster than the price level, then real wages have ________ and the purchasing power of income has ________.

Inflation redistributes income to a greater extent when the inflation is 'unanticipated'.

Looking at the following table, what is the rate of growth of the average price level from 2016 to 2017?

Weekly expenditures for a family of four in 2017 averaged $1 500. In 2018, the cost of the same purchases was $1 600. If 2017 is the base year, what was the CPI in 2018?

What is the difference between 'demand-pull inflation' and 'cost-push inflation'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Assume that between 2017 and 2018, the CPI of a country rose from 182 to 185. If household incomes rose by 3% during that period of time, then which of the following is true?

An increase in real wages shifts the aggregate supply curve to the left, always resulting in cost-push inflation.

There are no costs to inflation if it is fully anticipated.

Which of the following is not an economic cost of higher than anticipated inflation?

'Inflation' is an increase in the:

What is the result if inflation increases unexpectedly?

Looking at the following table, what is the rate of growth of real average hourly earnings from 2016 to 2017?

Hyperinflation occurred in Germany after World War I, when its inflation rate rose to 3.25 million per cent.

The stated interest rate on a loan is the:

What is 'outlet bias'?

Economics: Foundations and Models

Choices and Trade Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Gdp: Measuring Total Production, Income and Economic Growth

Economic Growth, the Financial System and Business Cycles

Long-Run Economic Growth: Sources and Policies

Unemployment

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

If nominal wages rise faster than the price level, then real wages have and the purchasing power of income has .

What is the difference between 'demand-pull inflation' and 'cost-push inflation'? _ _