Question 1

What is the difference between demand-pull inflation and cost-push inflation?

Accepted Answer

Demand-pull inflation occurs because of ...

Question 2

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 3

If the price of your cell phone service increases from $70 to $105 over a period of one year and your income rises from $1,500 to $1,525,your nominal income has

Accepted Answer

A)  Increased,and your real income has increased.
B)  Increased,but your real income has decreased.
C)  Decreased,and your real income has decreased.
D)  Increased,but your real income has remained the same.

Question 4

According to Figure 7.1,which of the following statements was definitely true about Country B?

Accepted Answer

A)  Relative prices were changing.
B)  The price level in general increased over the time period 1970 to 1995.
C)  Real incomes were increasing.
D)  The price level was about the same in 1970 and 1995.

Question 5

If deflation is 0.5 percent per year and you receive a 1 percent decrease in your salary,then your

Accepted Answer

A)  Real income falls,but your nominal income remains unchanged.
B)  Real and nominal income both fall.
C)  Real income remains unchanged,but your nominal income rises.
D)  Real and nominal income both rise.

Question 6

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 7

All of the following are macroeconomic effects of inflation except

Accepted Answer

A)  Uncertainty.
B)  Speculation.
C)  Bracket creep.
D)  Lower taxes.

Question 8

Which of the following measures changes in the average price of consumer goods and services?

Accepted Answer

A)  Inflation rate.
B)  CPI.
C)  Deflation rate.
D)  Market basket.

Question 9

Consider the economy represented in Figure 7.4.If actual inflation was greater than anticipated inflation,

Accepted Answer

A)  Borrowers would experience a decrease in real income.
B)  Lenders would experience a decrease in real income.
C)  Lenders would experience an increase in real income.
D)  The Federal Reserve would be forced to step in to increase lending.

Question 10

Which of the following indexes tracks changes in the average prices paid by consumers?

Accepted Answer

A)  CPI.
B)  PPI.
C)  GDP deflator.
D)  The market basket.

Question 11

Generally speaking,which of the following groups would tend to gain real income from the wealth effects of inflation?

Accepted Answer

A)  People with fixed income.
B)  People who have passbook savings accounts at fixed rates of interest.
C)  People who own assets that are appreciating faster than the inflation rate.
D)  People who hold all of their assets in the form of cash.

Question 12

For the CPI,the market basket is expressed in terms of what the goods cost in

Accepted Answer

A)  1929.
B)  2000.
C)  The base period.
D)  The optimal perioD.A base year is used as a frame of reference for the price level.

Question 13

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 14

Inflation means

Accepted Answer

A)  Specific prices are rising,and relative prices are falling.
B)  Both relative prices and average prices are rising.
C)  Relative prices are rising,but it is not certain what is happening to average prices.
D)  Average prices are rising,but it is not certain what is happening to relative prices.

Question 15

At the beginning of 2006 the CPI was 216.2.At the beginning of 2007,it was 225.1.What was the rate of inflation in 2006?

Accepted Answer

A)  4.9 percent.
B)  4.1 percent.
C)  3.6 percent.
D)  8.9 percent.

Question 16

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 17

Changes in relative prices may occur in a period of

Accepted Answer

A)  Stable prices only.
B)  Inflation only.
C)  Deflation only.
D)  Stable prices,inflation,or deflation.

Question 18

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 19

When there is no deflation or inflation,

Accepted Answer

A)  Prices of all goods change by the same percentage.
B)  Relative prices remain unchanged.
C)  Average prices do not change.
D)  Full employment is achieveD.Some prices may rise or fall,but on average prices are constant.

Question 20

If you were interested in charting prices of resources used by producers of energy,which of the following would you use?

Accepted Answer

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

Exam 7: Inflation

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

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Consider the economy represented in Figure 7.4.If actual inflation was greater than anticipated inflation,

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

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The most desirable inflation rate is the rate that

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If deflation is 0.5 percent per year and you receive a 1 percent decrease in your salary,then your

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Changes in relative prices may occur in a period of

Correct AnswerverifiedShow Answer

If you were interested in charting prices of resources used by producers of energy,which of the following would you use?

Correct AnswerverifiedShow Answer

According to Figure 7.3,prices and wages were rising,so

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Which of the following measures changes in the average price of consumer goods and services?

Correct AnswerverifiedShow Answer

Generally speaking,which of the following groups would tend to gain real income from the wealth effects of inflation?

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According to Figure 7.1,which of the following statements was definitely true about Country B?

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For the CPI,the market basket is expressed in terms of what the goods cost in

Correct AnswerverifiedShow Answer

Inflation means

Correct AnswerverifiedShow Answer

If the price of your cell phone service increases from $70 to $105 over a period of one year and your income rises from $1,500 to $1,525,your nominal income has

Correct AnswerverifiedShow Answer

At the beginning of 2006 the CPI was 216.2.At the beginning of 2007,it was 225.1.What was the rate of inflation in 2006?

Correct AnswerverifiedShow Answer

When there is no deflation or inflation,

Correct AnswerverifiedShow Answer

What is the difference between demand-pull inflation and cost-push inflation?

Correct AnswerverifiedDemand-pull inflation occurs because of ...View AnswerShow Answer

Which of the following indexes tracks changes in the average prices paid by consumers?

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

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All of the following are macroeconomic effects of inflation except

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Demand-pull inflation occurs because of ...
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