Question 1

Suppose the CPI was 132.00 in 1997 and is 135.30 in 1998. What is the rate of inflation over the period?

Accepted Answer

A)  2.43 percent. 
B)  2.5 percent. 
C)  3.3 percent. 
D)  9.77 percent. 
A)  2.43 percent. 
B)  2.5 percent. 
C)  3.3 percent. 
D)  9.77 percent. B

Question 2

Suppose the economy is currently suffering from inflation. In order to decrease the price level:

Accepted Answer

A)  the growth rate in the money supply could be decreased. 
B)  government spending could be increased. 
C)  aggregate supply could be decreased. 
D)  taxes could be decreased. 
A)  the growth rate in the money supply could be decreased. 
B)  government spending could be increased. 
C)  aggregate supply could be decreased. 
D)  taxes could be decreased. A

Question 3

Supply-side policies are a powerful anti-inflationary tool.

Accepted Answer

A) True 
 B)False  False

Question 4

Inflation can be measured by using:

Accepted Answer

A)  the rate of change of the GDP deflator. 
B)  the average growth rate of output over the business cycle. 
C)  the inverse of the unemployment rate. 
D)  the average price index. 
A)  the rate of change of the GDP deflator. 
B)  the average growth rate of output over the business cycle. 
C)  the inverse of the unemployment rate. 
D)  the average price index.

Question 5

The most appropriate policy to deal with inflation is:

Accepted Answer

A)  contractionary fiscal policy. 
B)  contractionary monetary policy. 
C)  supply-side policy. 
D)  All of the above. 
A)  contractionary fiscal policy. 
B)  contractionary monetary policy. 
C)  supply-side policy. 
D)  All of the above.

Question 6

The consumer price index is not an accurate measure of the cost of living because:

Accepted Answer

A)  it measures the goods and services bought by all urban households. 
B)  it is made up of a weighted average of prices. 
C)  it is made up of a variable basket of goods and services. 
D)  it does not fully account for changes in the quality of products. 
A)  it measures the goods and services bought by all urban households. 
B)  it is made up of a weighted average of prices. 
C)  it is made up of a variable basket of goods and services. 
D)  it does not fully account for changes in the quality of products.

Question 7

Suppose the annual growth rate in real GDP is 3.5 percent. If the money supply grows at an annual rate of 4 percent we would expect:

Accepted Answer

A)  inflation. 
B)  deflation. 
C)  hyperinflation. 
D)  under-inflation. 
A)  inflation. 
B)  deflation. 
C)  hyperinflation. 
D)  under-inflation.

Question 8

Which of the following statements is correct?

Accepted Answer

A)  The aggregate demand-aggregate supply model shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP. 
B)  The equation of exchange shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP. 
C)  The quantity theory of money shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP. 
D)  Incomes policy shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP. 
A)  The aggregate demand-aggregate supply model shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP. 
B)  The equation of exchange shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP. 
C)  The quantity theory of money shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP. 
D)  Incomes policy shows the relationship between the money supply, the income velocity of money, the GDP deflator, and real GDP.

Question 9

If we were most interested in the impact of price changes on consumers, we would examine the consumer price index (CPI).

Accepted Answer

A) True 
 B)False

Question 10

By increasing the growth rate of the money supply, the Federal Reserve can decrease the inflation rate.

Accepted Answer

A) True 
 B)False

Question 11

Inflation has been common throughout the history of the United States.

Accepted Answer

A) True 
 B)False

Question 12

Use the following diagram to answer the following questions.
  
-Refer to Diagram 14-2. In the above diagram, if the economy experiences inflation and unemployment caused by reduction in production of oil, the best policy to deal with both of these problems should target to:

Accepted Answer

A)  shift aggregate demand from AD₁ to AD₂. 
B)  shift aggregate demand from AD₂ to AD₁. 
C)  shift aggregate supply from AS₂ to AS₁. 
D)  shift aggregate supply from AS₁ to AS₂. 
A)  shift aggregate demand from AD₁ to AD₂. 
B)  shift aggregate demand from AD₂ to AD₁. 
C)  shift aggregate supply from AS₂ to AS₁. 
D)  shift aggregate supply from AS₁ to AS₂.

Question 13

Demand deposits are:

Accepted Answer

A)  time deposits that banks must pay to depositors upon demand. 
B)  checking accounts at commercial banks, savings institutions, and credit unions. 
C)  checking accounts at commercial banks. 
D)  commercial bank deposits at one of the twelve Federal Reserve Banks. 
A)  time deposits that banks must pay to depositors upon demand. 
B)  checking accounts at commercial banks, savings institutions, and credit unions. 
C)  checking accounts at commercial banks. 
D)  commercial bank deposits at one of the twelve Federal Reserve Banks.

Question 14

Suppose real GDP grows by 4 percent over the 1997 - 1998 time period. Over this same period, the money supply grows at a rate of 3.5 percent. We would expect:

Accepted Answer

A)  inflation. 
B)  deflation. 
C)  hyperinflation. 
D)  under-inflation. 
A)  inflation. 
B)  deflation. 
C)  hyperinflation. 
D)  under-inflation.

Question 15

Suppose politicians attempt to lower inflation by increasing worker productivity. In this case, politicians are using:

Accepted Answer

A)  contractionary fiscal policy. 
B)  contractionary monetary policy. 
C)  supply-side policy. 
D)  expansionary growth policy. 
A)  contractionary fiscal policy. 
B)  contractionary monetary policy. 
C)  supply-side policy. 
D)  expansionary growth policy.

Question 16

Which of the following is not a function of money?

Accepted Answer

A)  a standard of profitability. 
B)  a unit of account. 
C)  a medium of exchange. 
D)  a store of value. 
A)  a standard of profitability. 
B)  a unit of account. 
C)  a medium of exchange. 
D)  a store of value.

Question 17

Suppose the growth rate in real GDP is 4 percent and the growth rate in the money supply is 7.3 percent. What is the rate of inflation?

Accepted Answer

The rate of inflation is equal

Question 18

Evaluate the following statement. "During the past year the CPI increased by 12 percent. This means that the cost of living went up by 12 percent."

Accepted Answer

The student should note that there are s

Question 19

Inflation refers to:

Accepted Answer

A)  an increase in prices. 
B)  a continuing increase in the general price level. 
C)  an increase in average prices. 
D)  all of the above. 
A)  an increase in prices. 
B)  a continuing increase in the general price level. 
C)  an increase in average prices. 
D)  all of the above.

Question 20

Suppose the growth rate in the money supply is 8 percent. If the growth rate in real GDP is 3 percent, the quantity theory of money would predict:

Accepted Answer

A)  an inflation rate of 8 percent. 
B)  an inflation rate of 5 percent. 
C)  an inflation rate of 3 percent. 
D)  an inflation rate of 2 percent. 
A)  an inflation rate of 8 percent. 
B)  an inflation rate of 5 percent. 
C)  an inflation rate of 3 percent. 
D)  an inflation rate of 2 percent.

Suppose the CPI was 132.00 in 1997 and is 135.30 in 1998. What is the rate of inflation over the period?

Suppose the economy is currently suffering from inflation. In order to decrease the price level:

Supply-side policies are a powerful anti-inflationary tool.

Inflation can be measured by using:

The most appropriate policy to deal with inflation is:

The consumer price index is not an accurate measure of the cost of living because:

Suppose the annual growth rate in real GDP is 3.5 percent. If the money supply grows at an annual rate of 4 percent we would expect:

Which of the following statements is correct?

If we were most interested in the impact of price changes on consumers, we would examine the consumer price index (CPI).

By increasing the growth rate of the money supply, the Federal Reserve can decrease the inflation rate.

Inflation has been common throughout the history of the United States.

Use the following diagram to answer the following questions. -Refer to Diagram 14-2. In the above diagram, if the economy experiences inflation and unemployment caused by reduction in production of oil, the best policy to deal with both of these problems should target to:

Demand deposits are:

Suppose real GDP grows by 4 percent over the 1997 - 1998 time period. Over this same period, the money supply grows at a rate of 3.5 percent. We would expect:

Suppose politicians attempt to lower inflation by increasing worker productivity. In this case, politicians are using:

Which of the following is not a function of money?

Suppose the growth rate in real GDP is 4 percent and the growth rate in the money supply is 7.3 percent. What is the rate of inflation?

Evaluate the following statement. "During the past year the CPI increased by 12 percent. This means that the cost of living went up by 12 percent."

Inflation refers to:

Suppose the growth rate in the money supply is 8 percent. If the growth rate in real GDP is 3 percent, the quantity theory of money would predict:

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Sustained Budget Deficits: Is This Any Way to Run a Government

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

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Exam 14: Inflation: a Monetary Phenomenon

Suppose the CPI was 132.00 in 1997 and is 135.30 in 1998. What is the rate of inflation over the period?

Suppose the economy is currently suffering from inflation. In order to decrease the price level:

Supply-side policies are a powerful anti-inflationary tool.

Inflation can be measured by using:

The most appropriate policy to deal with inflation is:

The consumer price index is not an accurate measure of the cost of living because:

Suppose the annual growth rate in real GDP is 3.5 percent. If the money supply grows at an annual rate of 4 percent we would expect:

Which of the following statements is correct?

If we were most interested in the impact of price changes on consumers, we would examine the consumer price index (CPI).

By increasing the growth rate of the money supply, the Federal Reserve can decrease the inflation rate.

Inflation has been common throughout the history of the United States.

Use the following diagram to answer the following questions. -Refer to Diagram 14-2. In the above diagram, if the economy experiences inflation and unemployment caused by reduction in production of oil, the best policy to deal with both of these problems should target to:

Demand deposits are:

Suppose real GDP grows by 4 percent over the 1997 - 1998 time period. Over this same period, the money supply grows at a rate of 3.5 percent. We would expect:

Suppose politicians attempt to lower inflation by increasing worker productivity. In this case, politicians are using:

Which of the following is not a function of money?

Suppose the growth rate in real GDP is 4 percent and the growth rate in the money supply is 7.3 percent. What is the rate of inflation?

Evaluate the following statement. "During the past year the CPI increased by 12 percent. This means that the cost of living went up by 12 percent."

Inflation refers to:

Suppose the growth rate in the money supply is 8 percent. If the growth rate in real GDP is 3 percent, the quantity theory of money would predict:

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Sustained Budget Deficits: Is This Any Way to Run a Government

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

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