Question 1

Item weight is the

Accepted Answer

A) Measure of how much consumers demand a particular item. 
B) Percentage of total expenditure spent on a particular product. 
C) Significance placed on a particular item by the wealthiest households. 
D) Physical weight of a good or service. 
A) Measure of how much consumers demand a particular item. 
B) Percentage of total expenditure spent on a particular product. 
C) Significance placed on a particular item by the wealthiest households. 
D) Physical weight of a good or service. B

Question 2

Table 7.2 GDP for Newland
$$\begin{array} { | l | r | c | r | } 
\hline & \begin{array} { c } 
\text { Nominal GDP(in billions of } \
\text { dollars) }
\end{array} & \text { GDP deflator } & \multicolumn{2}{|c|} { \text { CPI } } \
\hline 2001 & \$ 5,900 & 120.1 & 128.3 \
\hline 2002 & 6,300 & 123.0 & 131.7 \
\hline 2003 & 6,800 & 126.3 & 136.5 \
\hline
\end{array}$$ Based on Table 7.2,the real GDP for 2003 was

Accepted Answer

A) $8,588.4 billion. 
B) $4,981.7 billion. 
C) $9,282.0 billion. 
D) $5,384.0 billion. 
A) $8,588.4 billion. 
B) $4,981.7 billion. 
C) $9,282.0 billion. 
D) $5,384.0 billion. D

Question 3

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. 
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. A

Question 4

The base period used in computing a price index is

Accepted Answer

A) The year in which prices were at their lowest level. 
B) The year in which prices were at their average level. 
C) A fixed reference year from which meaningful comparisons can be made. 
D) The earliest year for which data are available. 
A) The year in which prices were at their lowest level. 
B) The year in which prices were at their average level. 
C) A fixed reference year from which meaningful comparisons can be made. 
D) The earliest year for which data are available.

Question 5

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. 
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 6

The percentage of total expenditure spent on a specific product is called

Accepted Answer

A) Core inflation. 
B) A market basket. 
C) A budget. 
D) The item weight. 
A) Core inflation. 
B) A market basket. 
C) A budget. 
D) The item weight.

Question 7

Deflation is a/an ________ in the average level of prices of goods and services.

Accepted Answer

A) increase 
B) decrease 
C) stagnation 
D) increase followed by a decrease 
A) increase 
B) decrease 
C) stagnation 
D) increase followed by a decrease

Question 8

If your nominal income remains constant at $3,000 while the price of an important product in your budget,such as cell phone service,rises from $50 to $100,your real income has

Accepted Answer

A) Decreased by $50. 
B) Decreased by $100. 
C) Decreased by $150. 
D) Remained constant. 
A) Decreased by $50. 
B) Decreased by $100. 
C) Decreased by $150. 
D) Remained constant.

Question 9

The Producer Price Index (PPI)is the best index to measure average price changes faced by

Accepted Answer

A) Consumers. 
B) Producers. 
C) Importers. 
D) Labor unions negotiating COLAs. 
A) Consumers. 
B) Producers. 
C) Importers. 
D) Labor unions negotiating COLAs.

Question 10

A COLA is

Accepted Answer

A) A mortgage that adjusts the nominal interest rate to changing rates of inflation. 
B) A price index that refers to all goods and services included in GDP. 
C) An automatic adjustment of nominal income to the rate of inflation. 
D) An inflation rate of at least 200 percent,lasting more than one year. 
A) A mortgage that adjusts the nominal interest rate to changing rates of inflation. 
B) A price index that refers to all goods and services included in GDP. 
C) An automatic adjustment of nominal income to the rate of inflation. 
D) An inflation rate of at least 200 percent,lasting more than one year.

Question 11

Which of the following reflects changes in expenditure patterns as well as price changes?

Accepted Answer

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

Question 12

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

Question 13

The term "nominal income" refers to

Accepted Answer

A) Money income adjusted for any change in the price level. 
B) Real purchasing power. 
C) Real purchasing power deflated for rising prices. 
D) Money income measured in current dollars. 
A) Money income adjusted for any change in the price level. 
B) Real purchasing power. 
C) Real purchasing power deflated for rising prices. 
D) Money income measured in current dollars.

Question 14

A sudden increase in inflation,ceteris paribus,

Accepted Answer

A) Raises the real income of lenders relative to borrowers. 
B) Raises the CPI and reduces real income. 
C) Reduces the nominal income of those who have constant real incomes. 
D) Makes everyone worse off. 
A) Raises the real income of lenders relative to borrowers. 
B) Raises the CPI and reduces real income. 
C) Reduces the nominal income of those who have constant real incomes. 
D) Makes everyone worse off.

Question 15

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. 
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 16

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

Accepted Answer

A) True 
 B)False

Question 17

Using Figure 7.4,expected inflation was

Accepted Answer

A) Greater during the period from 1970 to 1975 than it was during the period from 1980 to 1985. 
B) The same in 1970 and 1995. 
C) Greater in 1970 than in 1995. 
D) Greater during the period from 1980 to 1985 than it was during the period from 1970 to 1975. 
A) Greater during the period from 1970 to 1975 than it was during the period from 1980 to 1985. 
B) The same in 1970 and 1995. 
C) Greater in 1970 than in 1995. 
D) Greater during the period from 1980 to 1985 than it was during the period from 1970 to 1975.

Question 18

Redistribution of wealth is a microeconomic effect of inflation.

Accepted Answer

A) True 
 B)False

Question 19

The movement of taxpayers into higher tax brackets as nominal incomes grow is

Accepted Answer

A) Bracket leap. 
B) Bracket hike. 
C) Bracket creep. 
D) Inflation hike. 
A) Bracket leap. 
B) Bracket hike. 
C) Bracket creep. 
D) Inflation hike.

Question 20

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

Accepted Answer

Demand-pull inflation occurs because of

Exam 7: Inflation

Item weight is the

Table 7.2 GDP for Newland Nominal GDP(in billions of dollars) GDP deflator \multicolumn 2 |c| CPI 2001 \ 5,900 120.1 128.3 2002 6,300 123.0 131.7 2003 6,800 126.3 136.5 Based on Table 7.2,the real GDP for 2003 was

According to Figure 7.1 in Country A,

The base period used in computing a price index is

Inflation means

The percentage of total expenditure spent on a specific product is called

Deflation is a/an ________ in the average level of prices of goods and services.

If your nominal income remains constant at $3,000 while the price of an important product in your budget,such as cell phone service,rises from $50 to $100,your real income has

The Producer Price Index (PPI)is the best index to measure average price changes faced by

A COLA is

Which of the following reflects changes in expenditure patterns as well as price changes?

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

The term "nominal income" refers to

A sudden increase in inflation,ceteris paribus,

The uncertainty that results from inflation causes changes in

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

Using Figure 7.4,expected inflation was

Redistribution of wealth is a microeconomic effect of inflation.

The movement of taxpayers into higher tax brackets as nominal incomes grow is

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

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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