Question 1

Which of the following statements is true?

Accepted Answer

A)  Nominal GDP = (price index $\div$  real GDP)$\times$ 100 
B)  Nominal GDP = (real GDP $\div$  price index)$\times$ 100 
C)  Real GDP = (price index $\div$  nominal GDP)$\times$ 100 
D)  Real GDP = (nominal GDP $\div$  price index)$\times$ 100 
E)  Price index = (real GDP $\div$  nominal GDP)$\times$ 100 
A)  Nominal GDP = (price index $\div$  real GDP)$\times$ 100 
B)  Nominal GDP = (real GDP $\div$  price index)$\times$ 100 
C)  Real GDP = (price index $\div$  nominal GDP)$\times$ 100 
D)  Real GDP = (nominal GDP $\div$  price index)$\times$ 100 
E)  Price index = (real GDP $\div$  nominal GDP)$\times$ 100

Question 2

Which of the following would be a redistributive cost of inflation?

Accepted Answer

A)  Additional trips to the bank 
B)  Reprinting menus and price tags 
C)  Comparison shopping 
D)  The real amount paid back for a loan compared to the expected real payments 
E)  The actual nominal rate on a loan compared to the expected nominal rate 
A)  Additional trips to the bank 
B)  Reprinting menus and price tags 
C)  Comparison shopping 
D)  The real amount paid back for a loan compared to the expected real payments 
E)  The actual nominal rate on a loan compared to the expected nominal rate

Question 3

Jim is negotiating a contract for a labor union.The union wants to increase members' real wages by 4 percent.The inflation rate is predicted to be 7 percent.To attain the union's goal,Jim needs to negotiate a raise in the nominal

Accepted Answer

A)  wage of 4 percent 
B)  wage of 7 percent 
C)  wage of 11 percent 
D)  rate of 3 percent 
E)  rate of 28 percent 
A)  wage of 4 percent 
B)  wage of 7 percent 
C)  wage of 11 percent 
D)  rate of 3 percent 
E)  rate of 28 percent

Question 4

-Refer to Figure 7-1.Based on the figure,

Accepted Answer

A)  since 1990,the price level has fallen 
B)  the price level was the highest in 1980 
C)  since 1965,the price level has risen sometimes and fallen other times 
D)  since 1965,the price level has risen every year 
E)  cannot tell what has happened to the price level since 1965 
A)  since 1990,the price level has fallen 
B)  the price level was the highest in 1980 
C)  since 1965,the price level has risen sometimes and fallen other times 
D)  since 1965,the price level has risen every year 
E)  cannot tell what has happened to the price level since 1965

Question 5

Which of the following best describes the term deflation?

Accepted Answer

A)  A falling inflation rate 
B)  A negative price level 
C)  A negative inflation rate 
D)  An increasing inflation rate 
E)  A positive inflation rate 
A)  A falling inflation rate 
B)  A negative price level 
C)  A negative inflation rate 
D)  An increasing inflation rate 
E)  A positive inflation rate

Question 6

In the following index: 2003 = 123.3;2004 = 145.3;2005 = 111.4;2006 = 100;2007 = 94.3,what is the rate of change from 2006 to 2007?

Accepted Answer

A)  5.7% 
B)  5% 
C)  4.3% 
D)  2.5% 
E)  unable to determine 
A)  5.7% 
B)  5% 
C)  4.3% 
D)  2.5% 
E)  unable to determine

Question 7

In 1996,an advisory committee of economists that studied the CPI found

Accepted Answer

A)  no bias in the CPI 
B)  that in a typical year the CPI overstates the inflation rate by at least 1.1 percent per year 
C)  that the CPI consistently overestimates the inflation rate by less than 1 percent per year 
D)  that the CPI typically underestimates the inflation rate 
E)  that the CPI is somewhat erratic;it occasionally underestimates and occasionally overestimates the inflation rate 
A)  no bias in the CPI 
B)  that in a typical year the CPI overstates the inflation rate by at least 1.1 percent per year 
C)  that the CPI consistently overestimates the inflation rate by less than 1 percent per year 
D)  that the CPI typically underestimates the inflation rate 
E)  that the CPI is somewhat erratic;it occasionally underestimates and occasionally overestimates the inflation rate

Question 8

When borrowing money to purchase an automobile,Raul has the choice between a fixed nominal interest rate or adjustable nominal interest rate loan.Typically the adjustable rate loans start with a lower rate than the fixed rate loans.Given that,under what circumstances would Raul most likely want to borrow money at the higher fixed rate?

Accepted Answer

A)  When he expects the inflation rate to rise 
B)  When he expects the inflation rate to decrease 
C)  When he expects the inflation rate to remain unchanged 
D)  When he expects the price level to remain stable 
E)  When he expects the government to act to lower the inflation rate 
A)  When he expects the inflation rate to rise 
B)  When he expects the inflation rate to decrease 
C)  When he expects the inflation rate to remain unchanged 
D)  When he expects the price level to remain stable 
E)  When he expects the government to act to lower the inflation rate

Question 9

If the price of used automobiles increased dramatically relative to all other prices,and the demand for all goods remained the same,which of the following would most likely occur?

Accepted Answer

A)  The GDP price index would decrease less than the CPI. 
B)  Both the GDP price index and the CPI would decrease. 
C)  The GDP price index would increase more than the CPI. 
D)  The CPI would increase more than the GDP price index. 
E)  Both the GDP price index and the CPI would increase by the same amount. 
A)  The GDP price index would decrease less than the CPI. 
B)  Both the GDP price index and the CPI would decrease. 
C)  The GDP price index would increase more than the CPI. 
D)  The CPI would increase more than the GDP price index. 
E)  Both the GDP price index and the CPI would increase by the same amount.

Question 10

In what sense is it a cost that people must spend time and resources coping with inflation?

Accepted Answer

A)  Because the loss of time and resources frustrates people unnecessarily 
B)  Because the time and resources could have been used to produce something else instead 
C)  Because the time and resources could have been wasted elsewhere 
D)  Because the time and resources are a sunk cost 
E)  Because the time and resources are insufficient to cope with the problem 
A)  Because the loss of time and resources frustrates people unnecessarily 
B)  Because the time and resources could have been used to produce something else instead 
C)  Because the time and resources could have been wasted elsewhere 
D)  Because the time and resources are a sunk cost 
E)  Because the time and resources are insufficient to cope with the problem

Question 11

Suppose the nominal interest rate charged is 5 percent and the expected inflation rate is 2 percent.Which of the following is the expected real interest rate?

Accepted Answer

A)  2 percent 
B)  5 percent 
C)  7 percent 
D)  -3 percent 
E)  3 percent 
A)  2 percent 
B)  5 percent 
C)  7 percent 
D)  -3 percent 
E)  3 percent

Question 12

What is creeping inflation?

Accepted Answer

A)  Inflation that continues to rise but slowly. 
B)  Inflation that suddenly appears without warning. 
C)  Price levels that suddenly rise without warning. 
D)  Price levels that continue to rise but slowly. 
E)  Inflation that suddenly appears and creates panic. 
A)  Inflation that continues to rise but slowly. 
B)  Inflation that suddenly appears without warning. 
C)  Price levels that suddenly rise without warning. 
D)  Price levels that continue to rise but slowly. 
E)  Inflation that suddenly appears and creates panic.

Question 13

The Bureau of :Labor Statistics has been compiling an experimental CPI for the elderly,called CPI-E.

Accepted Answer

A) True 
 B)False

Question 14

If the Consumer Price Index (CPI)increases from 100 to 200 and the nominal wage increases from $100 to $400,what is the change in the real wage in terms of the beginning year's dollars?

Accepted Answer

A)  +$200 
B)  +$400 
C)  +$100 
D)  +$300 
E)  -$200 
A)  +$200 
B)  +$400 
C)  +$100 
D)  +$300 
E)  -$200

Question 15

If a lender charged a 9 percent nominal interest rate and the expected inflation rate is 4 percent,what is the difference between the real rate the lender received and the real rate the lender expected when actual inflation ended up being 2 percent?

Accepted Answer

A)  2 percent 
B)  4 percent 
C)  -4 percent 
D)  1 percent 
E)  0 percent 
A)  2 percent 
B)  4 percent 
C)  -4 percent 
D)  1 percent 
E)  0 percent

Question 16

The prices of which of the following goods would be included in the Consumer Price Index?

Accepted Answer

A)  Fighter planes 
B)  Iron ore 
C)  Tennis shoes 
D)  Firefighters' services 
E)  IBM stock 
A)  Fighter planes 
B)  Iron ore 
C)  Tennis shoes 
D)  Firefighters' services 
E)  IBM stock

Question 17

The evidence from wage data allows us to conclude that nonsupervisory workers were economically worse off in 2008 than 1975.

Accepted Answer

A)  This conclusion is correct because such workers have been suffering form increasing unemployment since 1975 
B)  This conclusion is correct because such workers have been receiving an ever-decreasing share of their income in nonwage benefits. 
C)  This conclusion is correct because nominal wages for such workers have stayed constant since 1975. 
D)  This conclusion is correct because nominal wages for such workers have fallen since 1975. 
E)  This is a mistaken conclusion because the CPI overstates inflation. 
A)  This conclusion is correct because such workers have been suffering form increasing unemployment since 1975 
B)  This conclusion is correct because such workers have been receiving an ever-decreasing share of their income in nonwage benefits. 
C)  This conclusion is correct because nominal wages for such workers have stayed constant since 1975. 
D)  This conclusion is correct because nominal wages for such workers have fallen since 1975. 
E)  This is a mistaken conclusion because the CPI overstates inflation.

Question 18

Which of the following best describes the history of the U.S.price level from 1970 to 2008?

Accepted Answer

A)  The price level increased during the 1970s and 1980s,but decreased during the 1990s. 
B)  The price level increased during the 1970s but decreased during the 1980s and 1990s. 
C)  The price level decreased over the whole period. 
D)  The price level increased over the whole period. 
E)  The price level increased during the 1970s but decreased during the 1980s,and 1990s. 
A)  The price level increased during the 1970s and 1980s,but decreased during the 1990s. 
B)  The price level increased during the 1970s but decreased during the 1980s and 1990s. 
C)  The price level decreased over the whole period. 
D)  The price level increased over the whole period. 
E)  The price level increased during the 1970s but decreased during the 1980s,and 1990s.

Question 19

The Consumer Price Index includes the prices of only those goods

Accepted Answer

A)  purchased by consumers 
B)  purchased by consumers and produced in the United States 
C)  that are brand new and purchased by consumers 
D)  purchased by consumers and government 
E)  purchased by consumers,government and firms 
A)  purchased by consumers 
B)  purchased by consumers and produced in the United States 
C)  that are brand new and purchased by consumers 
D)  purchased by consumers and government 
E)  purchased by consumers,government and firms

Question 20

The Consumer Price Index (CPI)is a weighted average of all the prices paid by households for goods and services.

Accepted Answer

A) True 
 B)False

Exam 19: The Price Level and Inflation

Which of the following statements is true?

Which of the following would be a redistributive cost of inflation?

Jim is negotiating a contract for a labor union.The union wants to increase members' real wages by 4 percent.The inflation rate is predicted to be 7 percent.To attain the union's goal,Jim needs to negotiate a raise in the nominal

-Refer to Figure 7-1.Based on the figure,

Which of the following best describes the term deflation?

In the following index: 2003 = 123.3;2004 = 145.3;2005 = 111.4;2006 = 100;2007 = 94.3,what is the rate of change from 2006 to 2007?

In 1996,an advisory committee of economists that studied the CPI found

If the price of used automobiles increased dramatically relative to all other prices,and the demand for all goods remained the same,which of the following would most likely occur?

In what sense is it a cost that people must spend time and resources coping with inflation?

Suppose the nominal interest rate charged is 5 percent and the expected inflation rate is 2 percent.Which of the following is the expected real interest rate?

What is creeping inflation?

The Bureau of :Labor Statistics has been compiling an experimental CPI for the elderly,called CPI-E.

If the Consumer Price Index (CPI)increases from 100 to 200 and the nominal wage increases from $100 to $400,what is the change in the real wage in terms of the beginning year's dollars?

If a lender charged a 9 percent nominal interest rate and the expected inflation rate is 4 percent,what is the difference between the real rate the lender received and the real rate the lender expected when actual inflation ended up being 2 percent?

The prices of which of the following goods would be included in the Consumer Price Index?

The evidence from wage data allows us to conclude that nonsupervisory workers were economically worse off in 2008 than 1975.

Which of the following best describes the history of the U.S.price level from 1970 to 2008?

The Consumer Price Index includes the prices of only those goods

The Consumer Price Index (CPI)is a weighted average of all the prices paid by households for goods and services.

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Classical Long-Run Model

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-Run Macro Model

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

Filters