Exam 19: The Price Level and Inflation

Suppose Mike agrees to borrow $100 from Renee for one year at a one-time interest payment of 5%.They both expected the inflation rate to be 2% during the one-year period.However,during that year the inflation rate was actually 1%.Which of the following has occurred?

Careetha has just taken a fixed-rate loan and agreed to pay a nominal interest rate of 6 percent.If the inflation rate during the first year of the loan was 2 percent,her real interest rate that first year was

Factors that cause the CPI to exaggerate the inflation rate do not include

What is the value of any index in the base period?

If inflation is higher than anticipated and benefits are not indexed,which group loses purchasing power?

Which of the following is a definition of the real interest rate in a world with a positive inflation rate?

Suppose the Consumer Price Index (CPI)increased by 5 percent over each of the last 5 years while the GDP price index increased by 12 percent annually.Which of the following reasons could explain this difference?

If the prices of domestic consumer goods increased while the prices of imported consumer goods decreased,and the demand for each remained the same,which of the following would most likely occur?

A low rate of inflation,whereby prices increase so slowly from week to week that we hardly notice the change,is referred to as

Most economists agree that the size of the bias in the CPI is at least

Whenever prices are rising,the inflation rate is rising.

A payment that is periodically adjusted in proportion to a price index such as the CPI is known as a(n)

If inflation is fully anticipated and if there are no restrictions on contracts,then inflation will not redistribute purchasing power.

Suppose the economy includes two distinct groups of people: wage earners and goods sellers.If the price level falls by 10 percent and nominal wages remain unchanged,

The Consumer Price Index (CPI)

Which of the following would be included in the GDP Price Index but not in the Consumer Price Index?

Which of the following would be considered a resource cost of inflation?

A real variable is

If the CPI overstates the true rate of inflation,then

The index used to translate nominal GDP into real GDP is the