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Exam 18: Measuring the Price Level and Inflation

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Question 81

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The inflation rate can be calculated as the percentage change in:

A) real GDP.
B) nominal GDP.
C) the CPI.
D) the exchange rate.

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Question 82

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If workers received a 5 percent wage increase and the rate of inflation was 5 percent, then their real wage:

A) increased.
B) decreased.
C) remained constant.
D) equaled the nominal wage.

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Question 83

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The real rate of return on holding cash ________ inflation is correctly anticipated.

All of the following are real quantities except the:

If the bank agrees to make a loan at a 7 percent interest rate and the inflation rate is 3 percent, then 4 percent is the ________ rate.

A year's tuition at a state university cost $250 in 1972 when the CPI equaled 0.418. The cost of a year's tuition at the same state university cost $8,000 in 2016 when the CPI equaled 2.40. The real cost of tuition between 1972 and 2016:

Inflation is a measure of the ________ of prices; the CPI is a measure of the ________ of prices.

Suppose the value of the CPI is 1.100 in year one, 1.160 in year two, and 1.270 in year three. Assume also that the price of computers increases by 3 percent between year one and year two, and by another 3 percent between year two and year three. The price level is increasing, the inflation rate is ________, and the relative price of computers is ________.

If all prices, including the price of beef, increase by 3 percent, then the relative price of beef has ________ and inflation ________.

A report indicated that the average real wage in manufacturing declined by 2 percent between 1990 and 2000. If the CPI equaled 1.30 in 1990, 1.69 in 2000, and the average nominal wage in manufacturing was $35 in 2000, what was the average nominal wage in manufacturing in 1990?

Suppose the value of the CPI is 1.100 in year one, 1.122 in year two, and 1.133 in year three. Assume also that the price of computers increases by 3 percent between year one and year two, and by another 3 percent between year two and year three. The price level is increasing, the inflation rate is ________, and the relative price of computers is ________.

A CPI that equals 1.34 in 2016 (when 2010 is the base year) means that:

The consumer price index for the current year measures the cost of a standard basket in the ________ year relative to the cost of the same basket in the ________ year.

To counteract relative price changes, the government would implement:

An investor purchasing an inflation-protected bond with a fixed annual real return of 1.75 percent will earn a nominal annual return of ________ percent if the actual inflation rate turns out to be 3.25 percent.

The price level is:

A quantity measured in physical terms is called a ________ quantity.

Making more frequent, but smaller cash withdrawals from banks ________ the inflation losses from holding cash and ________ the shoe leather costs of inflation.

The ________ is the rate of change of the ________.

The CPI in year one equaled 1.45. The CPI in year two equaled 1.51. The rate of inflation between years one and two was ________ percent.