Question 1

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. 
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 2

All of the following statements about inflation in the United States are correct except

Accepted Answer

A) Since the Great Depression,average prices have risen almost every year. 
B) The inflation rate was 13.5 percent in 1980. 
C) Prior to World War II,the United States experienced periods of both deflation and inflation. 
D) Inflation was at its worst during the Great Depression. 
A) Since the Great Depression,average prices have risen almost every year. 
B) The inflation rate was 13.5 percent in 1980. 
C) Prior to World War II,the United States experienced periods of both deflation and inflation. 
D) Inflation was at its worst during the Great Depression.

Question 3

The core inflation rate involves all price changes including food and energy.

Accepted Answer

A) True 
 B)False

Question 4

If nominal GDP is $9,600 billion and the GDP deflator is 118.5,real GDP is

Accepted Answer

A) $6,586.7 billion. 
B) $10,852.7 billion. 
C) $3,657.0 billion. 
D) $8,101.3 billion. 
A) $6,586.7 billion. 
B) $10,852.7 billion. 
C) $3,657.0 billion. 
D) $8,101.3 billion.

Question 5

If the price level is falling,all of the following are true except

Accepted Answer

A) Lenders are better off. 
B) Businesses are reluctant to borrow money. 
C) Purchasing power increases. 
D) Borrowers are not affected. 
A) Lenders are better off. 
B) Businesses are reluctant to borrow money. 
C) Purchasing power increases. 
D) Borrowers are not affected.

Question 6

The best price index to use in calculating real GDP is

Accepted Answer

A) Any of the indexes because they all reflect price level changes. 
B) The CPI. 
C) The PPI. 
D) The GDP deflator. 
A) Any of the indexes because they all reflect price level changes. 
B) The CPI. 
C) The PPI. 
D) The GDP deflator.

Question 7

If the economy is producing at capacity and consumers are willing and able to buy more even more goods,this may cause

Accepted Answer

A) Demand-pull inflation. 
B) Cost-push inflation. 
C) Supply-side inflation. 
D) The price effect. 
A) Demand-pull inflation. 
B) Cost-push inflation. 
C) Supply-side inflation. 
D) The price effect.

Question 8

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. 
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 9

Your real income is

Accepted Answer

A) The amount of money you receive during a given time period. 
B) Measured in current dollars. 
C) The purchasing power of the money you receive. 
D) The same as your nominal income in times of high inflation. 
A) The amount of money you receive during a given time period. 
B) Measured in current dollars. 
C) The purchasing power of the money you receive. 
D) The same as your nominal income in times of high inflation.

Question 10

If your rent increases from $1,000 to $1,100 over a period of one year and your income rises from $6,000 to $7,000,your nominal income has

Accepted Answer

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

Question 11

All of the following are microeconomic consequences of inflation except

Accepted Answer

A) A price effect. 
B) An income effect. 
C) A wealth effect. 
D) A profit effect. 
A) A price effect. 
B) An income effect. 
C) A wealth effect. 
D) A profit effect.

Question 12

A mortgage that adjusts the nominal interest rate to changing rates of inflation is

Accepted Answer

A) An ARM. 
B) A PPI. 
C) A GDM. 
D) A COLA. 
A) An ARM. 
B) A PPI. 
C) A GDM. 
D) A COLA.

Exam 7: Inflation

The real interest rate is

All of the following statements about inflation in the United States are correct except

The core inflation rate involves all price changes including food and energy.

If nominal GDP is $9,600 billion and the GDP deflator is 118.5,real GDP is

If the price level is falling,all of the following are true except

The best price index to use in calculating real GDP is

If the economy is producing at capacity and consumers are willing and able to buy more even more goods,this may cause

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

Your real income is

If your rent increases from $1,000 to $1,100 over a period of one year and your income rises from $6,000 to $7,000,your nominal income has

All of the following are microeconomic consequences of inflation except

A mortgage that adjusts the nominal interest rate to changing rates of inflation is

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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