Question 1

What is deflation?

Accepted Answer

A)  An increase in the price level that reduces the GDP. 
B)  A decrease in the price level. 
C)  A decrease in the rate of inflation. 
D)  A reduction in GDP caused by changes in the price level. 
A)  An increase in the price level that reduces the GDP. 
B)  A decrease in the price level. 
C)  A decrease in the rate of inflation. 
D)  A reduction in GDP caused by changes in the price level. B

Question 2

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \text { Good } & \begin{array} { c } 
\text { Price Increase since } \
\text { Last Year }
\end{array} \
\hline \text { Amusement park tickets } & 5.0 \% \
\hline \text { Bowling balls } & 4.2 \% \
\hline \text { Camouflage neckties } & 3.1 \% \
\hline
\end{array}\
\text { Table } 8.1
\end{array}$$ Refer to Table 8.1,which gives hypothetical data on price changes for three goods.If the overall rate of inflation in the economy was 3.5%,which good(s)experienced a relative price increase?

Accepted Answer

A)  Amusement park tickets only. 
B)  Amusement park tickets and bowling balls. 
C)  Camouflage neckties only. 
D)  All three goods experienced relative price increases. 
A)  Amusement park tickets only. 
B)  Amusement park tickets and bowling balls. 
C)  Camouflage neckties only. 
D)  All three goods experienced relative price increases. B

Question 3

Federal spending on elementary and secondary education rose from $39.7 billion to $40 billion in 2007.Inflation at the time was 2.5%.Explain what happened to real spending on education in 2007.

Accepted Answer

The spending increase in 2007 was 0.8%; however,after subtracting the inflation rate of 2.5%,real spending actually declined by 1.7% (0.8% - 2.5% = -1.7%).

Question 4

Money illusion occurs when we compare dollar amounts

Accepted Answer

A)  without adjusting for technology. 
B)  without adjusting for inflation. 
C)  between two years. 
D)  between the CPI and the GDP. 
A)  without adjusting for technology. 
B)  without adjusting for inflation. 
C)  between two years. 
D)  between the CPI and the GDP.

Question 5

The average price level measures how much it costs to buy a market basket of common goods and services.

Accepted Answer

A) True 
 B)False

Question 6

A wage-price spiral occurs when

Accepted Answer

A)  businesses boost prices and wages to try to stay ahead of higher-than-expected inflation. 
B)  businesses reduce prices and wages to try to stay ahead of higher-than-expected deflation. 
C)  businesses boost production to try to stay ahead of higher-than-expected inflation. 
D)  businesses reduce production to try to stay ahead of higher-than-expected inflation. 
A)  businesses boost prices and wages to try to stay ahead of higher-than-expected inflation. 
B)  businesses reduce prices and wages to try to stay ahead of higher-than-expected deflation. 
C)  businesses boost production to try to stay ahead of higher-than-expected inflation. 
D)  businesses reduce production to try to stay ahead of higher-than-expected inflation.

Question 7

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \text { Good } & \begin{array} { c } 
\text { Price Increase since } \
\text { Last Year }
\end{array} \
\hline \text { Amusement park tickets } & 5.0 \% \
\hline \text { Bowling balls } & 4.2 \% \
\hline \text { Camouflage neckties } & 3.1 \% \
\hline
\end{array}\
\text { Table } 8.1
\end{array}$$ Refer to Table 8.1,which gives hypothetical data on price changes for three goods.If the overall rate of inflation in the economy was 4.5%,which of the following statements is true?

Accepted Answer

A)  The real price of all three goods increased. 
B)  The real price of amusement park tickets rose, and the real price of bowling balls and camouflage neckties fell. 
C)  The real price of amusement park tickets fell, and the real price of bowling balls and camouflage neckties rose. 
D)  The real price of all three goods decreased. 
A)  The real price of all three goods increased. 
B)  The real price of amusement park tickets rose, and the real price of bowling balls and camouflage neckties fell. 
C)  The real price of amusement park tickets fell, and the real price of bowling balls and camouflage neckties rose. 
D)  The real price of all three goods decreased.

Question 8

Inflation can be defined as

Accepted Answer

A)  an overall increase in prices. 
B)  a decline in prices. 
C)  a basic component of market balance. 
D)  the situation that exists when exports exceed imports. 
A)  an overall increase in prices. 
B)  a decline in prices. 
C)  a basic component of market balance. 
D)  the situation that exists when exports exceed imports.

Question 9

A relative price shift occurs when

Accepted Answer

A)  the inflation rate of a good or service remains unchanged. 
B)  the inflation rate of a good or service is significantly higher or lower than the overall inflation rate. 
C)  the inflation rate of a good or service matches the overall inflation rate. 
D)  inflation exceeds the average revenue per capita. 
A)  the inflation rate of a good or service remains unchanged. 
B)  the inflation rate of a good or service is significantly higher or lower than the overall inflation rate. 
C)  the inflation rate of a good or service matches the overall inflation rate. 
D)  inflation exceeds the average revenue per capita.

Question 10

Hyperinflation is

Accepted Answer

A)  a moderate increase in prices from year to year. 
B)  a very rapid increase in prices from year to year. 
C)  inflation calculated using new technology. 
D)  inflation calculated based on the CPI model. 
A)  a moderate increase in prices from year to year. 
B)  a very rapid increase in prices from year to year. 
C)  inflation calculated using new technology. 
D)  inflation calculated based on the CPI model.

Question 11

If an auto manufacturer installs antilock brakes on a vehicle,and that alone causes the price to increase by $100,the BLS

Accepted Answer

A)  counts that increase as part of the inflation rate. 
B)  does not count that increase as part of the inflation rate. 
C)  subtracts that price increase from the overall inflation rate. 
D)  counts only $50 of the price increase as part of the inflation rate. 
A)  counts that increase as part of the inflation rate. 
B)  does not count that increase as part of the inflation rate. 
C)  subtracts that price increase from the overall inflation rate. 
D)  counts only $50 of the price increase as part of the inflation rate.

Question 12

The average price level is equivalent to

Accepted Answer

A)  the price of a single good. 
B)  the price of a market basket of goods. 
C)  the price of exports. 
D)  the price of imports. 
A)  the price of a single good. 
B)  the price of a market basket of goods. 
C)  the price of exports. 
D)  the price of imports.

Question 13

Core inflation includes energy and food cost increases.

Accepted Answer

A) True 
 B)False

Question 14

What is the cost of transactions as it relates to the harm caused by inflation?

Accepted Answer

A)  The cost associated with the time and effort of managing your spending. 
B)  The cost of the products whose prices are rising. 
C)  Production costs plus profit. 
D)  The cost of the BLS market basket. 
A)  The cost associated with the time and effort of managing your spending. 
B)  The cost of the products whose prices are rising. 
C)  Production costs plus profit. 
D)  The cost of the BLS market basket.

Question 15

The Bureau of Labor Statistics has chosen the price level from __________ to be the base price level used in calculating the CPI.

Accepted Answer

A)  1992 
B)  1982-1984 
C)  2000-2005 
D)  1995 
A)  1992 
B)  1982-1984 
C)  2000-2005 
D)  1995

Question 16

Which of the following is an example of a company "offshoring" part of the production of a service?

Accepted Answer

A)  Scissors for haircuts being produced in China. 
B)  Technicians overseas reading X-rays taken in the United States. 
C)  An American traveler getting a tattoo while in Germany. 
D)  Foreign students studying at American universities. 
A)  Scissors for haircuts being produced in China. 
B)  Technicians overseas reading X-rays taken in the United States. 
C)  An American traveler getting a tattoo while in Germany. 
D)  Foreign students studying at American universities.

Question 17

The BLS has chosen 90 to represent the average 1982-1984 price level,and it now measures all other years relative to this base year.

Accepted Answer

A) True 
 B)False

Question 18

Disinflation and deflation are

Accepted Answer

A)  two different terms that describe the same thing. 
B)  often confused with each other. 
C)  exact opposites. 
D)  terms used to describe changes to the GDP. 
A)  two different terms that describe the same thing. 
B)  often confused with each other. 
C)  exact opposites. 
D)  terms used to describe changes to the GDP.

Question 19

What is the CPI?

Accepted Answer

A)  The Consumer Price Institute. 
B)  The consumer price index. 
C)  The consumer product index. 
D)  The consumer protection index. 
A)  The Consumer Price Institute. 
B)  The consumer price index. 
C)  The consumer product index. 
D)  The consumer protection index.

Question 20

Annual inflation equal to 1,000% means that prices are rising by

Accepted Answer

A)  100 times in a year. 
B)  10 times in a year. 
C)  500 times in a year. 
D)  1,000 times in a year. 
A)  100 times in a year. 
B)  10 times in a year. 
C)  500 times in a year. 
D)  1,000 times in a year.

What is deflation?

Federal spending on elementary and secondary education rose from $39.7 billion to $40 billion in 2007.Inflation at the time was 2.5%.Explain what happened to real spending on education in 2007.

Money illusion occurs when we compare dollar amounts

The average price level measures how much it costs to buy a market basket of common goods and services.

A wage-price spiral occurs when

Inflation can be defined as

A relative price shift occurs when

Hyperinflation is

If an auto manufacturer installs antilock brakes on a vehicle,and that alone causes the price to increase by $100,the BLS

The average price level is equivalent to

Core inflation includes energy and food cost increases.

What is the cost of transactions as it relates to the harm caused by inflation?

The Bureau of Labor Statistics has chosen the price level from __________ to be the base price level used in calculating the CPI.

Which of the following is an example of a company "offshoring" part of the production of a service?

The BLS has chosen 90 to represent the average 1982-1984 price level,and it now measures all other years relative to this base year.

Disinflation and deflation are

What is the CPI?

Annual inflation equal to 1,000% means that prices are rising by

Introduction

Demand and Supply: The Basics of the Market Economy

Market Equilibrium and Shifts

How Businesses Work

Competition and Market Power

Government and the Economy

The First Step Into Macroeconomics

Growth

Business Cycles, unemployment and Inflation

Fiscal Policy

Monetary Policy

The Financial Markets

International Trade

Technological Change

Economics of the Labor Market

The Distribution of Income

Economics of Retirement and Healthcare

Economics of Energy, the Environment, and Global Climate Change Glossary

Filters

Exam 8: Inflation

What is deflation?

Federal spending on elementary and secondary education rose from $39.7 billion to $40 billion in 2007.Inflation at the time was 2.5%.Explain what happened to real spending on education in 2007.

Money illusion occurs when we compare dollar amounts

The average price level measures how much it costs to buy a market basket of common goods and services.

A wage-price spiral occurs when

Inflation can be defined as

A relative price shift occurs when

Hyperinflation is

If an auto manufacturer installs antilock brakes on a vehicle,and that alone causes the price to increase by $100,the BLS

The average price level is equivalent to

Core inflation includes energy and food cost increases.

What is the cost of transactions as it relates to the harm caused by inflation?

The Bureau of Labor Statistics has chosen the price level from __________ to be the base price level used in calculating the CPI.

Which of the following is an example of a company "offshoring" part of the production of a service?

The BLS has chosen 90 to represent the average 1982-1984 price level,and it now measures all other years relative to this base year.

Disinflation and deflation are

What is the CPI?

Annual inflation equal to 1,000% means that prices are rising by

Introduction

Demand and Supply: The Basics of the Market Economy

Market Equilibrium and Shifts

How Businesses Work

Competition and Market Power

Government and the Economy

The First Step Into Macroeconomics

Growth

Business Cycles, unemployment and Inflation

Fiscal Policy

Monetary Policy

The Financial Markets

International Trade

Technological Change

Economics of the Labor Market

The Distribution of Income

Economics of Retirement and Healthcare

Economics of Energy, the Environment, and Global Climate Change Glossary

Filters