Deck 24: Inflation and Money

Question 1

Inflation is a:

A)rise in the economic growth rate.
B)decrease in the overall level of prices.
C)fall in the quality of a product.
D)rise in the overall level of prices.

Answer 1

D

Question 2

Deflation is a:

A)rise in the economic growth rate.
B)decrease in the overall level of prices.
C)fall in the quality of a product.
D)rise in the overall level of prices.

Answer 2

B

Question 3

Which of the following scenarios shows evidence of inflation?

A)You go to the soda machine and realize that a bottle of Fanta now costs 15 cents more.
B)You visit the local grocery store and see that your favorite chips are on sale for today only.
C)Your favorite bakery has changed ownership, and the cakes now seem to be lower in quality.
D)Your friend lends you $1,000 and asks for 2% interest.

Answer 3

A

Question 4

Which of the following scenarios shows evidence of inflation?

A)The economic growth rate in a country increases significantly.
B)The United Kingdom experiences a recession.
C)Watermelons are labeled "Buy one, get one free" at the local grocery.
D)The average house price in an economy rises.

Question 5

The consumer price index is an index that tracks the:

A)price that businesses pay over time for the inputs used in the production process.
B)average price that consumers pay over time for a representative basket of goods and services.
C)highest prices consumers pay over time for imported goods and services.
D)price of all goods and services produced domestically.

Question 6

The Producer Price Index is an index that tracks the:

A)price that businesses pay over time for the inputs used in the production process.
B)average price that consumers pay over time for a representative basket of goods and services.
C)highest prices consumers pay over time for imported goods and services.
D)price of all goods and services produced domestically.

Question 7

The GDP deflator is an index that tracks the:

A)price that businesses pay over time for the inputs used in the production process.
B)average price that consumers pay over time for a representative basket of goods and services.
C)highest prices consumers pay over time for imported goods and services.
D)price of all goods and services produced domestically.

Question 8

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1991?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 1990 & 130.66 \\\hline 1991 & 136.17 \\\hline 1992 & 140.31 \\\hline 1993 & 144.48 \\\hline 1994 & 148.23 \\\hline 1995 & 152.38 \\\hline\end{array}\end{array}$$

A)3.04%
B)2.79%
C)2.97%
D)4.22%

Question 9

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1993?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 1990 & 130.66 \\\hline 1991 & 136.17 \\\hline 1992 & 140.31 \\\hline 1993 & 144.48 \\\hline 1994 & 148.23 \\\hline 1995 & 152.38 \\\hline\end{array}\end{array}$$

A)3.04%
B)2.79%
C)2.97%
D)4.22%

Question 10

The table shows consumer price index data for the United States. In which year was the inflation rate the highest?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 1990 & 130.66 \\\hline 1991 & 136.17 \\\hline 1992 & 140.31 \\\hline 1993 & 144.48 \\\hline 1994 & 148.23 \\\hline 1995 & 152.38 \\\hline\end{array}\end{array}$$

A)1991
B)1992
C)1993
D)1994

Question 11

The table shows consumer price index data for the United States. In which year was the inflation rate the lowest?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 1990 & 130.66 \\\hline 1991 & 136.17 \\\hline 1992 & 140.31 \\\hline 1993 & 144.48 \\\hline 1994 & 148.23 \\\hline 1995 & 152.38 \\\hline\end{array}\end{array}$$

A)1991
B)1992
C)1993
D)1994

Question 12

Which of the following correctly shows the steps needed to calculate the inflation rate?

A)Find the total value of the basket of goods and services, assess quality changes from one period to the next, and measure the inflation rate.
B)Tally up the cost of the basket of goods and services, subtract the value of goods and services that are no longer counted in the basket, and then calculate the inflation rate.
C)Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.
D)Collect prices from the stores where people shop, assess the substitution that people make from low inflation to high inflation products, and calculate the difference in the prices that people pay.

Question 13

Which of the following is NOT a step in calculating the inflation rate from one period to the next?

A)Find the total value of the basket of goods and services.
B)Measure the change in quality of the products from one period to the other.
C)Collect the prices from the stores where people shop.
D)Find out what people typically buy.

Question 14

In 1989, a four-year college degree would set you back $26,902. The consumer price index was 123.94 in January 1989. If the current consumer price index is 251.1, what is the cost of the four-year degree in current dollars?

A)$13,278.51
B)$26,902
C)$41,224.41
D)$54,502.92

Question 15

In 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four-year degree in current dollars?

A)$8,746
B)$1,410
C)$227
D)$9,422

Question 16

In the 1950s, the average price of a ticket to an afternoon movie was 14 cents. The price index in 1952 was 26.56. How much would that 14-cent movie ticket cost in today's dollars if the current price index is 251.1?

A)$1.32
B)$1.46
C)$0.15
D)$1.00

Question 17

In 2007, a U.S. forever stamp cost $0.41. In 2019, a U.S. forever stamp cost $0.55. In January 2007, the consumer price index was 207.34. If in January 2019, the consumer price index was 251.1, what is the approximate price of the 2007 forever stamp in 2019 dollars?

A)$0.55
B)$0.41
C)$0.50
D)$0.96

Question 18

In 1971, when the consumer price index was 40.48, men earned a median income of $6,903 per year. If the consumer price index in 2012 was 229.6, how much was $6,903 in 2012 dollars?

A)$6,903
B)$37,504.6
C)$1,217
D)$39,153.4

Question 19

In 1971, when the consumer price index was 40.48, women earned a median income of $2,408 per year. If the consumer price index in 2012 was 229.6, how much was $2,408 in 2012 dollars?

A)$2,408
B)$13,658
C)$29,076
D)$425

Question 20

In 1979, when the consumer price index was 72.58, men earned a median income of $11,779 per year. If the consumer price index in 2015 was 236.99, how much was $11,779 in 2015 dollars?

A)$42,959
B)$3,607
C)$38,461
D)$11,779

Question 21

In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars?

A)$18,865
B)$7,799
C)$12,130
D)$16,259

Question 22

In 2014, the action movie John Wick made about $14.5 million in its opening weekend. In 2017, John Wick: Chapter 2 made about $30.5 million in its opening weekend. The consumer price index in 2014 was 236.7. If the consumer price index in 2017 was 245.1, how much did the first John Wick movie make in 2017 dollars?

A)$29 million
B)$14 million
C)$14.5 million
D)$15 million

Question 23

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is:

A)understated inflation.
B)the failure to capture real variables versus nominal variables.
C)substitution bias.
D)quality bias.

Question 24

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 2006?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 2005 & 195.27 \\\hline 2006 & 201.56 \\\hline 2007 & 207.34 \\\hline 2008 & 215.25 \\\hline 2009 & 214.57 \\\hline 2010 & 218.08 \\\hline\end{array}\end{array}$$

A)3.81%
B)3.22%
C)1.64%
D)2.87%

Question 25

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 2008?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 2005 & 195.27 \\\hline 2006 & 201.56 \\\hline 2007 & 207.34 \\\hline 2008 & 215.25 \\\hline 2009 & 214.57 \\\hline 2010 & 218.08 \\\hline\end{array}\end{array}$$

A)3.81%
B)3.22%
C)1.64%
D)2.87%

Question 26

The table shows consumer price index data for the United States. In which year was the inflation rate the highest?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 2005 & 195.27 \\\hline 2006 & 201.56 \\\hline 2007 & 207.34 \\\hline 2008 & 215.25 \\\hline 2009 & 214.57 \\\hline 2010 & 218.08 \\\hline\end{array}\end{array}$$

A)2006
B)2007
C)2008
D)2009

Question 27

The table shows consumer price index data for the United States. In which year did deflation occur?
$$\begin{array}{l}\text { U.S. CONSUMER PRICE INDEX }\\\begin{array} { | c | c | } \hline \text { YEAR } & \begin{array} { c } \text { CONSUMER } \\\text { PRICE INDEX }\end{array} \\\hline 2005 & 195.27 \\\hline 2006 & 201.56 \\\hline 2007 & 207.34 \\\hline 2008 & 215.25 \\\hline 2009 & 214.57 \\\hline 2010 & 218.08 \\\hline\end{array}\end{array}$$

A)2006
B)2007
C)2008
D)2009

Question 28

The CPI changes from 100 to 200. This means that:

A)overall prices have doubled.
B)the inflation rate has doubled.
C)there is deflation.
D)the base year has changed.

Question 29

The CPI changes from 100 to 90. This means that:

A)the base year index has been changed to 90.
B)90% of all prices have fallen.
C)consumers now purchased 10% fewer goods due to inflation.
D)there is deflation.

Question 30

The CPI changes from 100 to 125. This means that:

A)consumers are now able to purchase 25% more goods and services.
B)overall prices are now 25% higher than they used to be.
C)the base year index has changed from 100 to 125.
D)the GDP deflator has also risen from 100 to 125.

Question 31

The table shows consumer price index data for the United Kingdom. Based on this information, what is the rate of inflation in 2014?
UK CONSUMER
PRICE INDEX
$\begin{array} { | l | l | } \hline YEAR & CPI \\\hline 2013 & 98.2 \\\hline 2014 & 99.6 \\\hline 2015 & 100 \\\hline 2016 & 101 \\\hline 2017 & 103.6 \\\hline 2018 & 106 \\\hline\end{array}$

A)2.29%
B)1.43%
C)2.57%
D)0.40%

Question 32

The table shows consumer price index data for the United Kingdom. Based on this information, what is the rate of inflation in 2016?
UK CONSUMER
PRICE INDEX
$\begin{array} { | l | l | } \hline YEAR & CPI \\\hline 2013 & 98.2 \\\hline 2014 & 99.6 \\\hline 2015 & 100 \\\hline 2016 & 101 \\\hline 2017 & 103.6 \\\hline 2018 & 106 \\\hline\end{array}$

A)1.43%
B)2.29%
C)1%
D)2.32%

Question 33

The table shows consumer price index data for the United Kingdom. Based on this information, what is the rate of inflation in 2018?
UK CONSUMER
PRICE INDEX
$\begin{array} { | l | l | } \hline YEAR & CPI \\\hline 2013 & 98.2 \\\hline 2014 & 99.6 \\\hline 2015 & 100 \\\hline 2016 & 101 \\\hline 2017 & 103.6 \\\hline 2018 & 106 \\\hline\end{array}$

A)2.32%
B)0.40%
C)1.43%
D)2.57%

Question 34

The table shows consumer price index data for the United Kingdom. In which year was the inflation rate the highest?
UK CONSUMER
PRICE INDEX
$\begin{array} { | l | l | } \hline YEAR & CPI \\\hline 2013 & 98.2 \\\hline 2014 & 99.6 \\\hline 2015 & 100 \\\hline 2016 & 101 \\\hline 2017 & 103.6 \\\hline 2018 & 106 \\\hline\end{array}$

A)2014
B)2015
C)2016
D)2017

Question 35

The table shows consumer price index data for the United Kingdom. Which year was the base year for this index?
UK CONSUMER
PRICE INDEX
$\begin{array} { | l | l | } \hline YEAR & CPI \\\hline 2013 & 98.2 \\\hline 2014 & 99.6 \\\hline 2015 & 100 \\\hline 2016 & 101 \\\hline 2017 & 103.6 \\\hline 2018 & 106 \\\hline\end{array}$

A)2014
B)2015
C)2016
D)2017

Question 36

If you see that inflation between last year and this year is 3%, this means that:

A)the prices of each and every good and service went up by 3%.
B)economic growth is also 3%.
C)on average, prices went up across the economy by 3%.
D)the consumer price index rose by 3% more than the producer price index.

Question 37

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

A)the consumer price index is lower than the producer price index.
B)the prices of each and every good and service went down.
C)economic growth also decreased.
D)on average, prices went down across the economy.

Question 38

Money illusion is the:

A)increase in the amount of money that it takes to purchase goods and services when prices rise.
B)inability to understand that prices always rise.
C)tendency to focus on nominal values instead of inflation-adjusted values.
D)illusion that one's earnings this year are higher than they were last year.

Question 39

Which of the following is an example of someone who is experiencing money illusion?

A)The CPI in an economy has decreased by 5%, but Vivian will not accept lower nominal wages because she believes this is unfair.
B)The CPI in an economy has increased by 2.3%, and Paul's nominal wage is increased by 2.3%.
C)Darren sees that prices in the economy have risen by 2% and that the nominal interest rate on his savings account rose 0.5%. So Darren knows he is experiencing a 1.5% decrease in his real interest earnings.
D)Prices have not changed in the economy, so your boss does not give you a raise.

Question 40

Consider the following basket of goods: 10 loaves of bread, 300 oranges, four pairs of jeans, and two pairs of shoes. Suppose that in 2017, each loaf of bread was $2.99, each orange was $1, each pair of jeans was $47, and each pair of shoes was $95. In 2018, each loaf of bread was $2.99, each orange was $0.75, each pair of jeans was $49.50, and each pair of shoes was $99.99. What was the inflation rate in 2018?

A)-4.2%
B)1.2%
C)8.4%
D)-7.8%

Question 41

Consider the following basket of goods: 50 bottles of milk, 100 avocadoes, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. What is the inflation rate between last year and this year?

A)-10%
B)10.13%
C)-9.09%
D)8.99%

Question 42

Consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the approximate value of the basket in 2015?

A)$5,737
B)$100
C)$1,337
D)$1,400

Question 43

Consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the value of the basket in 2016?

A)$5,737
B)$100
C)$1,337
D)$1,400

Question 44

Consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the approximate inflation rate in 2016?

A)4.4%
B)4.7%
C)4%
D)-4.7%

Question 45

Consider the following basket of goods: 15 lollipops, 10 bars of chocolate, four jars of peanut butter, and two ice-cream cakes. Suppose that in 1999, each lollipop was 10 cents, each bar of chocolate was $1.50, each jar of peanut butter was $2.50, and each ice-cream cake was $7.99. In 2018, each lollipop was 80 cents, each bar of chocolate was $3.75, each jar of peanut butter was $4.25, and each ice-cream cake was 12.99. What was the value of the basket in 1999?

A)$117.70
B)$42.48
C)$92.48
D)$217.70

Question 46

Consider the following basket of goods: 15 lollipops, 10 bars of chocolate, four jars of peanut butter, and two ice-cream cakes. Suppose that in 1999, each lollipop was 10 cents, each bar of chocolate was $1.50, each jar of peanut butter was $2.50, and each ice-cream cake was $7.99. In 2018, each lollipop was 80 cents, each bar of chocolate was $3.75, each jar of peanut butter was $4.25, and each ice-cream cake was 12.99. What was the value of the basket in 2018?

A)$117.70
B)$42.48
C)$92.48
D)$217.70

Question 47

Consider the following basket of goods: 15 lollipops, 10 bars of chocolate, four jars of peanut butter, and two ice-cream cakes. Suppose that in 1999, each lollipop was 10 cents, each bar of chocolate was $1.50, each jar of peanut butter was $2.50, and each ice-cream cake was $7.99. In 2018, each lollipop was 80 cents, each bar of chocolate was $3.75, each jar of peanut butter was $4.25, and each ice-cream cake was 12.99. What was the rate of inflation between 1999 and 2018?

A)117.7%
B)17.7%
C)217.7%
D)7.7%

Question 48

Which of the following explains why the price of a product might rise from one year to the next?
(i) an increase in quality
(ii) industry pricing trends
(iii) increased costs of production
(iv) an increase in demand for the product

A)(iii) only
B)(iii) and (iv)
C)(i), (iii), and (iv)
D)(i), (ii), (iii), and (iv)

Question 49

How does money illusion cause nominal wage rigidity?

A)Wages fall only when money illusion is present.
B)Since workers focus on nominal wages, employers focus on matching the rate of wage increase with the rate of inflation.
C)Money illusion leads to workers asking for fixed wage increases (and decreases) adjusted to the rate of inflation (or deflation).
D)Since workers focus on nominal earnings and thus resent wage cuts, employers often choose to hold nominal wages constant rather than lower them.

Question 50

Which of the following shows the medium of exchange function of money?

A)Darius goes window shopping.
B)Mena saves his money in a certificate of deposit at the bank.
C)Wilma wants to sell her old car, and she values it at $2,400.
D)Daniela goes to the store and purchases roses with U.S. dollars.

Question 51

What is the GDP deflator if nominal GDP is $300 billion and real GDP is also $300 billion?

A)100
B)0
C)50
D)300

Question 52

What is Belgium's real GDP if its nominal GDP is $532 billion (in current US$) and the GDP deflator is 119.9?

A)$532 billion
B)$443.7 billion
C)$633 billion
D)$398 billion

Question 53

What is Sri Lanka's GDP deflator if its nominal GDP is $88.9 billion (in current US$) and the real GDP is $59.34 billion?

A)136.5
B)100
C)149.8
D)66.7

Question 54

What is Costa Rica's GDP deflator if its nominal GDP is $60.13 billion (in current US$) and the real GDP is $49.17 billion?

A)149.17
B)81.77
C)100
D)122.3

Question 55

What is Botswana's real GDP if its nominal GDP is $18.6 billion (in current US$) and the GDP deflator is 196.7?

A)$15.8 billion
B)$18.6 billion
C)$9.5 billion
D)$36.6 billion

Question 56

What is Uganda's real GDP if its nominal GDP is $27.5 billion (in current US$), and the GDP deflator is 163.4?

A)$44.9 billion
B)$16.8 billion
C)$27.5 billion
D)$12.4 billion

Question 57

What is Nicaragua's GDP deflator if its nominal GDP is $13.118 billion (in current US$) and the real GDP is $5.676 billion?

A)43.27
B)231.1
C)100
D)113.1

Question 58

What is Eswatini's real GDP if its nominal GDP is $4.7 billion (in current US$) and the GDP deflator is 147.5?

A)$3.2 billion
B)$4.7 billion
C)$2.8 billion
D)$6.9 billion

Question 59

What is the United Arab Emirates' real GDP if its nominal GDP is $414.18 billion (in current US$) and the GDP deflator is 105.45?

A)$414.18 billion
B)$417.19 billion
C)$392.77 billion
D)$436.75 billion

Question 60

What is Fiji's GDP deflator if its nominal GDP is $5.48 billion (in current US$) and the real GDP is $5.21 billion?

A)103.9
B)105.2
C)122.3
D)115.4

Question 61

What is Iceland's real GDP if its nominal GDP is $25.9 billion (in current US$) and the GDP deflator is 124.5?

A)$25.9 billion
B)$24.5 billion
C)$20.8 billion
D)$32.2 billion

Question 62

Hyperinflation is:

A)a period of high money growth in an economy.
B)extremely high rates of inflation.
C)very high rates of economic growth.
D)inflation that occurs when the economy is in a recession.

Question 63

Which of the following is an example of hyperinflation?

A)An economy experiences over 10% economic growth in one year.
B)There is deflation of 20% in an economy.
C)An economy experiences inflation of more than 7,500% in one year.
D)Economic growth decreases by more than 15% in one year.

Question 64

In 2014, Venezuela experienced inflation of about 69%. In 2015, the inflation rate rose to around 181%, and by 2017, the inflation rate was over 4,000%. This scenario describes:

A)hyperinflation.
B)economic growth.
C)deflation.
D)money illusion.

Question 65

Menu costs are the:

A)costs of producing restaurant meals.
B)variety of costs that cause producers to change their prices.
C)marginal costs of adjusting prices.
D)total costs of producing goods and services.

Question 66

The real interest rate is the:

A)stated interest rate without a correction for inflation.
B)interest rate in terms of changes in purchasing power.
C)stated interest rate without a correction for deflation.
D)interest rate after taxes are deducted.

Question 67

The nominal interest rate is the:

A)stated interest rate without a correction for inflation.
B)interest rate in terms of changes in purchasing power.
C)stated change in real purchasing power.
D)interest rate after taxes are deducted.

Question 68

The real interest rate is the:

A)percentage of the nominal interest that is inflation.
B)economic growth rate adjusted for the effects of inflation.
C)nominal interest rate plus the rate of inflation.
D)nominal interest rate minus the rate of inflation.

Question 69

Meredith has purchased a guaranteed income certificate (GIC) in Canada. This financial instrument pays her 1% interest per year. However, inflation during the same year is 2%. What was Meredith's nominal interest rate on her GIC?

A)3%
B)-1%
C)1%
D)2%

Question 70

Meredith has purchased a guaranteed income certificate (GIC) in Canada. This financial instrument pays her 1% interest per year. However, inflation during the same year is 2%. What was Meredith's real interest rate on her GIC?

A)3%
B)-1%
C)1%
D)2%

Question 71

You open a savings account that pays 0.75% interest a year. What is your real rate of return if the inflation rate is 1%?

A)-0.25%
B)-0.75%
C)1%
D)1.75%

Question 72

You purchase a certificate of deposit that pays an advertised rate of 2.25% interest per year. What is your nominal rate of return if the actual inflation rate is 1.65%?

A)2.25%
B)-0.6%
C)1.65%
D)0.6%

Question 73

You purchase a certificate of deposit that pays an advertised rate of 2.25% interest per year. What is your real rate of return if the actual inflation rate is 1.65%?

A)2.25%
B)-0.6%
C)1.65%
D)0.6%

Question 74

You open a savings account that pays 1.67% interest a year. What is your real rate of return if the actual inflation rate is 1.67%?

A)0%
B)-1.75%
C)1.67%
D)3.34%

Question 75

You purchase a certificate of deposit that earns an advertised rate of 1.75% interest per year. What is your real rate of return if the actual inflation rate is 1.9%?

A)3.65%
B)-0.15%
C)1.75%
D)0.15%

Question 76

You purchase a certificate of deposit and expect an inflation rate of 1.5% over the next year. Your nominal rate of interest is 2.25%. What is your expected real rate of return?

A)2.25%
B)0.75%
C)-0.75%
D)3.75%

Question 77

You purchase a certificate of deposit and expect an inflation rate of 1.5% over the next year. Your nominal rate of interest is 2.25%. Over the next year, the actual inflation rate turns out to be 1.75%. What is your actual real rate of return?

A)0.25%
B)0.75%
C)0.5%
D)-0.25%

Question 78

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return?

A)0.85%
B)1.25%
C)-0.85%
D)-2.1%

Question 79

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. Over the next year, the actual inflation rate turns out to be 0.95%. What is your actual real rate of return?

A)0.95%
B)2.1%
C)1.15%
D)-0.3%

Question 80

You open a savings account that earns a nominal interest rate of 1.3% interest a year. The current consumer price index is 117. In one year, the consumer price index is expected to go to 120. What is your expected real rate of return?

A)-1.26%
B)-2.56%
C)2.7%
D)3%