Question 1

The base period is the

Accepted Answer

A)  Time period used for comparative analysis.
B)  Absence of significant changes in the average price level.
C)  Time period when full employment is reached.
D)  First year in which inflation figures were calculated.

Question 2

If some specific prices fall,some relative prices rise,and average prices remain unchanged,there has been a period of

Accepted Answer

A)  Stable price levels.
B)  Inflation.
C)  Deflation.
D)  Disinflation.

Question 3

Use the following figure to answer the questions : Figure 7.1: 
-According to Figure 7.1 in Country A,

Accepted Answer

A)  Relative prices may have been changing,but average prices were constant.
B)  Relative prices were definitely constant.
C)  Average prices and relative prices were definitely changing.
D)  Average prices were constant, and unemployment was increasing.

Question 4

Which of the following is often watched closely as a clue to potential changes in consumer prices in the future?

Accepted Answer

A)  The CPI.
B)  The PPI.
C)  The GDP deflator.
D)  The COLAs.

Question 5

Money illusion results from expectations based on real purchasing power rather than current nominal income.

Accepted Answer

A) True 
 B)False

Question 6

Assume the CPI increases from 110 to 121,and Manny's nominal income increases from $100,000 to $120,000 over the same period.Manny's real income has

Accepted Answer

A)  Increased by approximately 12 percent.
B)  Increased by approximately 9 percent.
C)  Decreased by approximately 8 percent.
D)  Remained the same.

Question 7

The CPI is a measure of changes in the average price of consumer goods and services.

Accepted Answer

A) True 
 B)False

Question 8

If the nominal interest rate is 10 percent and the real interest rate is 6 percent,

Accepted Answer

A)  The expected rate of inflation is 4 percent.
B)  The expected rate of inflation is 6 percent.
C)  Real GDP must exceed nominal GDP.
D)  Nominal GDP equals real GDP.

Question 9

When the price of a good decreases more slowly than an index of average prices decreases,the good's relative price

Accepted Answer

A)  Has risen while its absolute price has fallen.
B)  And its absolute price have risen.
C)  And its absolute price have fallen.
D)  Has fallen while its absolute price has risen.

Question 10

Your real income is

Accepted Answer

A)  The amount of money you receive during a given time period.
B)  Measured in current dollars.
C)  The purchasing power of the money you receive.
D)  The same as your nominal income in times of high inflation. C

Question 11

Nominal GDP is the

Accepted Answer

A)  Price index that refers to all goods and services included in GDP.
B)  Value of final output produced using American-owned factors of production.
C)  Value of final output produced,measured in current prices.
D)  Value of final output produced, adjusted for changing prices.

Question 12

Relative price is

Accepted Answer

A)  The price of one good in comparison with the price of other goods.
B)  A decrease in purchasing power because of rising prices.
C)  The amount of income a particular good requires.
D)  The current price paid for a good or service.

Question 13

The most visible consequence of inflation is

Accepted Answer

A)  A rise in employment.
B)  A rise in production.
C)  A rise in the price level.
D)  A change in government regulation. C

Question 14

If your nominal income rises faster than the price level,

Accepted Answer

A)  Your real income has fallen.
B)  Your real income has risen.
C)  You can buy fewer goods and services.
D)  There must be deflation.

Question 15

The undesirable effects of bracket creep can be eliminated by indexing marginal tax rates.

Accepted Answer

A) True 
 B)False  True

Question 16

Changes in relative prices may occur

Accepted Answer

A)  Only in periods of stable prices.
B)  Only in periods of inflation or deflation.
C)  In periods of stable prices or in periods of inflation or deflation.
D)  In none of the other choices.

Question 17

Why did the Full Employment and Balanced Growth Act establish 3 percent inflation as the benchmark rather than zero inflation?

Accepted Answer

The goal was set at 3 percent because of...

Question 18

Which of the following is not true for the GDP deflator?

Accepted Answer

A)  It is based on a fixed basket of goods and services.
B)  It refers to all goods and services produced in GDP.
C)  It typically reveals a lower inflation rate than the CPI.
D)  It reflects both price changes and market responses.

Question 19

To compute the real income of a household,the index that should be used is the

Accepted Answer

A)  Producer Price Index (PPI) .
B)  Consumer Price Index (CPI) .
C)  GDP deflator.
D)  Cost of Living Adjustment (COL
A)  .

Question 20

Relative price changes are a desirable and essential ingredient of the market mechanism.

Accepted Answer

A) True 
 B)False

Exam 7: Inflation

The base period is the

Correct AnswerverifiedShow Answer

If some specific prices fall,some relative prices rise,and average prices remain unchanged,there has been a period of

Correct AnswerverifiedShow Answer

Use the following figure to answer the questions : Figure 7.1: -According to Figure 7.1 in Country A,

Correct AnswerverifiedShow Answer

Which of the following is often watched closely as a clue to potential changes in consumer prices in the future?

Correct AnswerverifiedShow Answer

Money illusion results from expectations based on real purchasing power rather than current nominal income.

Correct AnswerverifiedShow Answer

Assume the CPI increases from 110 to 121,and Manny's nominal income increases from $100,000 to $120,000 over the same period.Manny's real income has

Correct AnswerverifiedShow Answer

The CPI is a measure of changes in the average price of consumer goods and services.

Correct AnswerverifiedShow Answer

If the nominal interest rate is 10 percent and the real interest rate is 6 percent,

Correct AnswerverifiedShow Answer

When the price of a good decreases more slowly than an index of average prices decreases,the good's relative price

Correct AnswerverifiedShow Answer

Your real income is

Correct AnswerverifiedC

Nominal GDP is the

Correct AnswerverifiedShow Answer

Relative price is

Correct AnswerverifiedShow Answer

The most visible consequence of inflation is

Correct AnswerverifiedC

If your nominal income rises faster than the price level,

Correct AnswerverifiedShow Answer

The undesirable effects of bracket creep can be eliminated by indexing marginal tax rates.

Correct AnswerverifiedTrue

Changes in relative prices may occur

Correct AnswerverifiedShow Answer

Why did the Full Employment and Balanced Growth Act establish 3 percent inflation as the benchmark rather than zero inflation?

Correct AnswerverifiedThe goal was set at 3 percent because of...View AnswerShow Answer

Which of the following is not true for the GDP deflator?

Correct AnswerverifiedShow Answer

To compute the real income of a household,the index that should be used is the

Correct AnswerverifiedShow Answer

Relative price changes are a desirable and essential ingredient of the market mechanism.

Correct AnswerverifiedShow Answer

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C

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C

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True

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The goal was set at 3 percent because of...
View Answer

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