Question 1

Which of the following functions are performed by changes in relative prices but not by changes in average prices?

Accepted Answer

A) Computing real income from nominal income. 
B) Indicating an overheating economy. 
C) Signaling changes in the desired mix of output. 
D) Measuring the rates of inflation. 
A) Computing real income from nominal income. 
B) Indicating an overheating economy. 
C) Signaling changes in the desired mix of output. 
D) Measuring the rates of inflation.

Question 2

Real income is

Accepted Answer

A) Nominal income adjusted for inflation. 
B) The amount of money income received in a given time period,measured in current dollars. 
C) The use of nominal dollars to gauge changes in income. 
D) None of the other choices. 
A) Nominal income adjusted for inflation. 
B) The amount of money income received in a given time period,measured in current dollars. 
C) The use of nominal dollars to gauge changes in income. 
D) None of the other choices.

Question 3

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. 
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 4

Cost-of-living adjustments

Accepted Answer

A) Reduce the price effect of inflation. 
B) Allow individuals to maintain their purchasing power during inflation. 
C) Cause individuals to shorten their time horizons. 
D) Maintain constant real interest rates. 
A) Reduce the price effect of inflation. 
B) Allow individuals to maintain their purchasing power during inflation. 
C) Cause individuals to shorten their time horizons. 
D) Maintain constant real interest rates.

Question 5

The most fundamental function of prices in a market economy is to provide

Accepted Answer

A) The data necessary to calculate rates of inflation. 
B) The basis for the calculation of sales tax. 
C) Information about the relative scarcities of resources and goods and services. 
D) Maximum profits to producers. 
A) The data necessary to calculate rates of inflation. 
B) The basis for the calculation of sales tax. 
C) Information about the relative scarcities of resources and goods and services. 
D) Maximum profits to producers.

Question 6

When people make decisions on the basis of the face value of currency rather than the real value,their decisions reflect

Accepted Answer

A) The price effect of inflation. 
B) The income effect of inflation. 
C) The wealth effect of inflation. 
D) Money illusion. 
A) The price effect of inflation. 
B) The income effect of inflation. 
C) The wealth effect of inflation. 
D) Money illusion.

Question 7

Based on the real interest rate,who tends to benefit from unanticipated inflation in terms of borrowing and lending?

Accepted Answer

The real interest rate is the nominal in

Question 8

In the Full Employment and Balanced Growth Act of 1978,price stability means that

Accepted Answer

A) There is zero inflation each year. 
B) Inflation is less than 5 percent per year. 
C) The inflation rate is the same each year. 
D) Inflation is less than 3 percent per year. 
A) There is zero inflation each year. 
B) Inflation is less than 5 percent per year. 
C) The inflation rate is the same each year. 
D) Inflation is less than 3 percent per year.

Question 9

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

Question 10

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

Question 11

If the Consumer Price Index rose from 180.9 in 2005 to 418.5 in 2015,what is the total percentage change in prices over this 10-year period?

Accepted Answer

A) 131.34 percent. 
B) 18.5 percent. 
C) 80.9 percent. 
D) 127.21 percent. 
A) 131.34 percent. 
B) 18.5 percent. 
C) 80.9 percent. 
D) 127.21 percent.

Question 12

The GDP deflator

Accepted Answer

A) Is the price index based on a fixed basket of goods and services for the government. 
B) Is the best measure of inflation for consumers. 
C) Reflects the price changes felt by producers but not consumers. 
D) Is the broadest price index,covering all output. 
A) Is the price index based on a fixed basket of goods and services for the government. 
B) Is the best measure of inflation for consumers. 
C) Reflects the price changes felt by producers but not consumers. 
D) Is the broadest price index,covering all output.

Question 13

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

Question 14

If a price index changed from 150 in 2008 to 148.5 in 2009,while Jim Bob's nominal wage fell from $25 to $24,then Jim Bob is

Accepted Answer

A) Better off like everyone else in the economy since prices are lower for consumers. 
B) Neither better nor worse off since his real wage remained constant. 
C) Better off since his nominal wage fell slower than the price level did. 
D) Worse off since his nominal wage fell faster than the price level did. 
A) Better off like everyone else in the economy since prices are lower for consumers. 
B) Neither better nor worse off since his real wage remained constant. 
C) Better off since his nominal wage fell slower than the price level did. 
D) Worse off since his nominal wage fell faster than the price level did.

Question 15

Real GDP is the

Accepted Answer

A) Value of final output produced,adjusted for changing prices. 
B) Value of final output produced,measured in current prices. 
C) Income earned by current factors of production. 
D) GDP minus depreciation. 
A) Value of final output produced,adjusted for changing prices. 
B) Value of final output produced,measured in current prices. 
C) Income earned by current factors of production. 
D) GDP minus depreciation.

Question 16

If the average price level increases by 2 percent this year,price stability has been achieved.

Accepted Answer

A) True 
 B)False

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. 
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 amount of income received in a given time period,measured in current dollars,is

Accepted Answer

A) Nominal income. 
B) Real income. 
C) Relative income. 
D) The Consumer Price Index. 
A) Nominal income. 
B) Real income. 
C) Relative income. 
D) The Consumer Price Index.

Question 19

Table 7.1 GDP
$$\begin{array} { | l | r | c | r | } 
\hline & \begin{array} { c } 
\text { Nominal GDP(in billions of } \
\text { dollars) }
\end{array} & \text { GDP deflator } & { \text { CPI } } \
\hline 2002 & \$6,992.4 & 106.2 & 151.6 \
\hline 2003 & 7,431.6 & 109.1 & 153 .8 \
\hline 2004 & 7,843.2 & 112.3 & 157 .8 \
\hline
\end{array}$$ Based on Table 7.1,the rate of inflation between 2002 and 2003 using the CPI was

Accepted Answer

A) 1.5 percent. 
B) 2.2 percent. 
C) 6.2 percent. 
D) 4.1 percent. 
A) 1.5 percent. 
B) 2.2 percent. 
C) 6.2 percent. 
D) 4.1 percent.

Question 20

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. 
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.

Exam 7: Inflation

Which of the following functions are performed by changes in relative prices but not by changes in average prices?

Real income is

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

Cost-of-living adjustments

The most fundamental function of prices in a market economy is to provide

When people make decisions on the basis of the face value of currency rather than the real value,their decisions reflect

Based on the real interest rate,who tends to benefit from unanticipated inflation in terms of borrowing and lending?

In the Full Employment and Balanced Growth Act of 1978,price stability means that

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

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

If the Consumer Price Index rose from 180.9 in 2005 to 418.5 in 2015,what is the total percentage change in prices over this 10-year period?

The GDP deflator

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

If a price index changed from 150 in 2008 to 148.5 in 2009,while Jim Bob's nominal wage fell from $25 to $24,then Jim Bob is

Real GDP is the

If the average price level increases by 2 percent this year,price stability has been achieved.

The inflation rate is the

The amount of income received in a given time period,measured in current dollars,is

Table 7.1 GDP Nominal GDP(in billions of dollars) GDP deflator CPI 2002 \6 ,992.4 106.2 151.6 2003 7,431.6 109.1 153.8 2004 7,843.2 112.3 157.8 Based on Table 7.1,the rate of inflation between 2002 and 2003 using the CPI was

When there is no deflation or 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

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Global Poverty

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