Question 1

The uncertainty that results from inflation causes changes in

Accepted Answer

A)  Consumption,saving,and investment behavior.
B)  Saving and investment behavior,but not consumption.
C)  Consumption,but not saving and investment behavior.
D)  Income, but not consumption.

Question 2

If the CPI doesn't measure product quality improvements,the CPI tends to

Accepted Answer

A)  Understate the inflation rate.
B)  Overstate the inflation rate.
C)  Understate economic growth.
D)  Be artificially low.

Question 3

Income in constant prices is

Accepted Answer

A)  Nominal income.
B)  Real income.
C)  Bracket creep.
D)  Income effect.

Question 4

If the CPI increases from 250 to 275 for one year,the rate of inflation for that year is

Accepted Answer

A)  13 percent.
B)  10 percent.
C)  25 percent.
D)  50 percent.

Question 5

Use the following figure to answer the questions : Figure 7.3 : 
-According to Figure 7.3,prices and wages were rising,so

Accepted Answer

A)  Sellers of output were better off than wage earners.
B)  Everyone must have been worse off since the price level rose faster than incomes.
C)  There were no redistributive effects of inflation.
D)  The economy was experiencing stagflation.

Question 6

During a period of inflation,are all prices rising? Explain your answer.

Accepted Answer

No.Inflation is defined as an ...

Question 7

According to the text,which group of assets increased the most in percentage terms from 1991 to 2001?

Accepted Answer

A)  Housing.
B)  Gold.
C)  Stocks.
D)  Bonds.

Question 8

If OPEC raises the price of oil and production costs increase,this may cause

Accepted Answer

A)  Cost-push inflation.
B)  Demand-pull inflation.
C)  Hyperinflation.
D)  Super-pull inflation.

Question 9

Money illusion is the

Accepted Answer

A)  Use of nominal dollars rather than real dollars to gauge income or wealth.
B)  Movement of taxpayers into higher tax brackets as nominal income increases.
C)  Focus on real dollars rather than nominal dollars to determine purchasing power.
D)  Uncertainty that occurs because of inflation.

Question 10

To construct the Consumer Price Index,the Bureau of Labor Statistics must

Accepted Answer

A)  Find out what people buy with their incomes and how the prices of what they buy change.
B)  Find out why people buy,what they buy,and how the prices of what they buy change.
C)  Find out what is in the typical consumer market basket on the basis of what producers produce.
D)  Conduct producer surveys to determine how much prices rise.

Question 11

If nominal GDP is constant,then the GDP deflator varies inversely with

Accepted Answer

A)  The unemployment rate.
B)  Real GDP.
C)  COLAs.
D)  The CPI.

Question 12

A friend tells you that his income has risen every year by 5 percent.At the same time,prices,on average,have risen by 5 percent.Your friend claims he is better off.Your friend

Accepted Answer

A)  Is experiencing money illusion.
B)  Really is better off as he suggests.
C)  Has experienced an increase in nominal and real income.
D)  Has experienced an increase in real income only.

Question 13

The real interest rate is

Accepted Answer

A)  The difference between the prime rate and the rate charged by the government (the Federal Reserve) on loans.
B)  The nominal interest rate minus the anticipated rate of inflation.
C)  The inflation rate minus the percentage increase in average wages.
D)  The sum of inflation rates and unemployment rates.

Question 14

Which of the following is a microeconomic consequence of inflation?

Accepted Answer

A)  Greater unemployment.
B)  Greater real income.
C)  The wealth effect.
D)  None of the other choices.

Question 15

Uncertainty and speculation are microeconomic effects of inflation.

Accepted Answer

A) True 
 B)False

Question 16

In the Full Employment and Balanced Growth Act of 1978,

Accepted Answer

A)  Congress set an inflation goal of no more than 3 percent.
B)  The president set an inflation goal of 0 percent.
C)  Alan Greenspan set an inflation goal of 0 percent.
D)  An unemployment goal of 4 percent was set, but no inflation goal could be set.

Question 17

The inflation rate is the

Accepted Answer

A)  Monthly percentage rate increase in the price of all goods and services.
B)  Annual percentage rate increase in tax brackets.
C)  Annual percentage rate increase in the average price level.
D)  Monthly adjustment of wages to the cost of living.

Question 18

The core inflation rate excludes

Accepted Answer

A)  Entertainment and packaging prices.
B)  Food and energy prices.
C)  Only energy prices for the airlines.
D)  Import prices.

Question 19

The most desirable inflation rate is the rate that

Accepted Answer

A)  Equals the official goal of 3 percent.
B)  Has the least effect on the behavior of companies,investors,consumers,and workers.
C)  Maximizes the "wealth effect" of inflation.
D)  Coincides with an unemployment rate of 0 percent.

Question 20

A decrease in the average level of prices of goods and services is

Accepted Answer

A)  Deflation.
B)  Recession.
C)  Depression.
D)  Inflation

Exam 7: Inflation

The uncertainty that results from inflation causes changes in

Correct AnswerverifiedShow Answer

A friend tells you that his income has risen every year by 5 percent.At the same time,prices,on average,have risen by 5 percent.Your friend claims he is better off.Your friend

Correct AnswerverifiedShow Answer

According to the text,which group of assets increased the most in percentage terms from 1991 to 2001?

Correct AnswerverifiedShow Answer

Income in constant prices is

Correct AnswerverifiedShow Answer

The core inflation rate excludes

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During a period of inflation,are all prices rising? Explain your answer.

Correct AnswerverifiedNo.Inflation is defined as an ...View AnswerShow Answer

In the Full Employment and Balanced Growth Act of 1978,

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The real interest rate is

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Uncertainty and speculation are microeconomic effects of inflation.

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Which of the following is a microeconomic consequence of inflation?

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A decrease in the average level of prices of goods and services is

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Use the following figure to answer the questions : Figure 7.3 : -According to Figure 7.3,prices and wages were rising,so

Correct AnswerverifiedShow Answer

If nominal GDP is constant,then the GDP deflator varies inversely with

Correct AnswerverifiedShow Answer

Money illusion is the

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The inflation rate is the

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To construct the Consumer Price Index,the Bureau of Labor Statistics must

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The most desirable inflation rate is the rate that

Correct AnswerverifiedShow Answer

If OPEC raises the price of oil and production costs increase,this may cause

Correct AnswerverifiedShow Answer

If the CPI doesn't measure product quality improvements,the CPI tends to

Correct AnswerverifiedShow Answer

If the CPI increases from 250 to 275 for one year,the rate of inflation for that year is

Correct AnswerverifiedShow Answer

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No.Inflation is defined as an ...
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