Deck 7: Inflation and the Measurement of Prices

Question 1

If the Consumer Price Index in year 1 was 131 and the rate of inflation was 6.1% what is the Consumer Price Index in year 2?

A)7.86
B)123.5
C)139
D)209.6

Answer 1

C

Question 2

Providing a common measure of the worth of a good is money's role as a

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

Answer 2

A

Question 3

A measure used to calculate inflation is the

A)difference in Consumer Price Index between two periods.
B)change in the PPI between two periods.
C)percent change in the price index between two periods.
D)summation of the price indices between two periods.

Answer 3

C

Question 4

When money is used to purchase a good or service it is serving the role of a

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

Question 5

A decline in the overall prices of goods and services is

A)disinflation.
B)inflation.
C)deflation.
D)hyperinflation.

Question 6

A price level of 120 means that prices have

A)increased 120 percent since the base year.
B)increased 20 percent since the base year.
C)increased 0.12 percent since the base year.
D)increased 12 times since the base year.

Question 7

You decide you want to compare your average price level for what you spend on entertainment.Last year, which you decide will be the base year, your spent $50 for a concert, $15 per movie, and $25 for a dinner out.This year, these same activities cost $75, $20, and $40, respectively.Calculate your entertainment index.

A)1.5
B)150
C).67
D)66.7

Question 8

Purchasing power

A)reflects the number of goods and services that can be acquired with a given amount of money.
B)reflects the dollar value of goods and services purchased.
C)reflects the increase of prices for goods and services.
D)reflects the change in consumption patterns.

Question 9

Inflation is

A)the rise in all prices in an economy.
B)the rise in the general level of prices in an economy.
C)the rise in the general level of prices of personal consumption of urban consumers.
D)the rise in the rate of increase in all prices in an economy.

Question 10

Using money earned today for future purchases is money's role as a

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

Question 11

Which of the following is not a role of money?

A)Unit of account
B)Store of value
C)Medium of exchange
D)Unit of standard

Question 12

When you use money to compare value it is used as

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

Question 13

In year 1 the Consumer Price Index was 125 and 131 in the next year.What is the rate of inflation?

A)4.5
B)4.8%
C)6%
D)6.3%

Question 14

You receive a raise of 3% at work.The rate of inflation is reported to be 5%.

A)Your purchasing power has decreased 2%.
B)Your purchasing power has increased 2%.
C)Your purchasing power remains the same.
D)Your purchasing power is not a variable and therefore is not affected.

Question 15

Fiat money is

A)money that has value because of government law or regulation.
B)money because it is backed by gold or silver.
C)money because of tradition and acceptance.
D)counterfeit money.

Question 16

You decide you want to compare your average price level for what you spend on entertainment.Last year, which you decide will be the base year, your spent $50 for a concert, $15 per movie, and $25 for a dinner out.This year, these same activities cost $75, $20, and $40, respectively.Calculate your entertainment index in the base year.

A)1
B)100
C)1.5
D)150

Question 17

The measure of the average prices of a given set of goods and services over time is an)

A)business cycle.
B)reflection of consumption patterns.
C)price index.
D)indicator of employment levels.

Question 18

The most widely used measure for tracking prices in the United States is the

A)GDP Inflator.
B)Consumer Price Index.
C)Personal Consumption Expenditures.
D)Producer Price Index.

Question 19

Which of the following statements is correct?

A)The CPI is the ratio of the cost of the market basket in the base year to the cost of the market basket in one year.
B)The CPI is the ratio of the cost of the market basket in the base year to the cost of the market basket in one year multiplied by 100.
C)The CPI is the ratio of the cost of the market basket in one year to the cost of the market basket in the base year.
D)The CPI is the ratio of the cost of the market basket in one year to the cost of the market basket in the base year multiplied by 100.

Question 20

A slowing of the rate of price increases in the economy is

A)disinflation.
B)inflation.
C)deflation.
D)hyperinflation.

Question 21

A nominal quantity is one that is measured

A)using the GDP deflator.
B)in current dollar value.
C)in physical, or constant, terms.
D)using the CPI.

Question 22

Values that are in current, or face, value, is known as

A)real value.
B)nominal value.
C)marginal value.
D)constant value.

Question 23

Values that have been adjusted for inflation is known as

A)real value.
B)nominal value.
C)marginal value.
D)face value.

Question 24

This type of inflation is a result of decreases in aggregate supply.

A)Hyperinflation
B)Cost-push
C)Stagflation
D)Demand-pull

Question 25

All of the following can be identifies as a source of inflation except

A)aggregate demand.
B)aggregate supply.
C)increases in the money supply.
D)decreases in the money supply.

Question 26

When inflation occurs, money saved ____________ its purchasing power and becomes a poor ____________.

A)gains in; unit of value
B)loses; unit of value
C)gains in; store of value
D)loses; store of value

Question 27

This type of inflation is a result of increases in aggregate demand.

A)Hyperinflation
B)Cost-push
C)Stagflation
D)Demand-pull

Question 28

Consider the following sectors of an economy's population. i.Savers
Ii)Borrowers
Iii)People of fixed income
Iv)Lenders
Which of the above lose due to inflation?

A)i, ii ,iii
B)i, ii ,iii, iv
C)i, iv
D)i, iii, iv

Question 29

Which of the following would contribute to cost-push inflation?

A)An increase in the costs of inputs of production
B)An increase in the supply of inputs of production
C)An increase in government spending
D)An increase in income taxes

Question 30

If an economy is at Point a as illustrated, which of the following can be expected?

A)Demand-push inflation
B)Demand-pull inflation
C)Cost-push inflation
D)Cost-pull inflation

Question 31

_____________________ will benefit from inflation.

A)Savers
B)Borrowers
C)Lenders
D)People on fixed income

Question 32

Cost-push inflation can be caused by

A)an increase in government spending.
B)an increase in a source of raw material.
C)a change in aggregate demand.
D)the supply side of the market.

Question 33

The inflation experienced by the United States during the 1970s was a result of

A)demand-push inflation.
B)demand-pull inflation.
C)cost-push inflation.
D)cost-pull inflation.

Question 34

You are attending the same University where your grandparents attended and have just landed a job at a local retail store when your Grandfather also worked in 1972.You accept the position for a t wage of $10.00 per hour.Your Grandfather's wage was $2.37 per hour.The CPI in 1972 was 41.8 and is 230.21 today.Real income between 1972 and today has

A)increased.
B)decreased.
C)stayed the same.
D)fluctuated.

Question 35

You have been offered two jobs in two different cities.The jobs are very similar in description.The first job offer is in Denver, Colorado at an annual salary of $52,000.The second job offer is for a job in Chicago, Illinois at an annual salary of $60,000.The cost of living index for Denver is 115 and 135 for Chicago.Which position will provide you the greater purchasing power?

Question 36

A quantity identified in constant terms is called a _______________ quantity.

A)real value
B)nominal value
C)marginal value
D)face value

Question 37

Inflation that results from an increase in any of the components of aggregate demand is

A)demand-push inflation.
B)demand-pull inflation.
C)cost-push inflation.
D)cost-pull inflation.