Question 1

The "new product bias" in the consumer price index refers to the idea that

Accepted Answer

A)  consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. 
B)  consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. 
C)  consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. 
D)  new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers. 
A)  consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. 
B)  consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. 
C)  consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. 
D)  new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

Question 2

When the actual inflation rate turns out to be greater than the expected inflation rate,who gains -- the borrower or the lender -- and who loses? Explain why.

Accepted Answer

The borrower gains because he pays back

Question 3

Which of the following would be the best measure of the cost of living?

Accepted Answer

A)  real GDP 
B)  real GDP per person 
C)  GDP deflator 
D)  consumer price index 
A)  real GDP 
B)  real GDP per person 
C)  GDP deflator 
D)  consumer price index

Question 4

If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

Accepted Answer

A) True 
 B)False

Question 5

Describe how inflation can be costly even if it is anticipated.

Accepted Answer

First,there will be redistribution as so

Question 6

The nominal interest rate plus the inflation rate equals the real interest rate.

Accepted Answer

A) True 
 B)False

Question 7

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

Accepted Answer

A)  employed 
B)  unemployed 
C)  a discouraged worker 
D)  out of the labor force 
A)  employed 
B)  unemployed 
C)  a discouraged worker 
D)  out of the labor force

Question 8

If inflation is anticipated,some effects of inflation on the redistribution of income can be avoided.

Accepted Answer

A) True 
 B)False

Question 9

Cyclical unemployment is the result of

Accepted Answer

A)  a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. 
B)  the search process of matching workers with jobs. 
C)  the ups and downs in inflation. 
D)  a slowdown in the economy. 
A)  a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. 
B)  the search process of matching workers with jobs. 
C)  the ups and downs in inflation. 
D)  a slowdown in the economy.

Question 10

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

Accepted Answer

A) True 
 B)False

Question 11

Real interest rates at times have been negative.Why would anyone lending money agree to a negative real interest rate?

Accepted Answer

The lender did not agree to a negative r

Question 12

The economy has gone into a recession.You have majored in computer science and,because of the recession,have difficulty in finding a job.Should you go back to school and get a second major?

Accepted Answer

A)  Yes, the recession will ensure that you will never find a job as a programmer. 
B)  Yes, the recession will lower income in my field permanently. 
C)  No, the recession will most likely be short-lived and I can get a job after it is over. 
D)  No, the recession will have no impact on my ability to get a job or my future income. 
A)  Yes, the recession will ensure that you will never find a job as a programmer. 
B)  Yes, the recession will lower income in my field permanently. 
C)  No, the recession will most likely be short-lived and I can get a job after it is over. 
D)  No, the recession will have no impact on my ability to get a job or my future income.

Question 13

The real interest rate equals the nominal interest rate ________ the inflation rate.

Accepted Answer

A)  times 
B)  divided by 
C)  plus 
D)  minus 
A)  times 
B)  divided by 
C)  plus 
D)  minus

Question 14

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Accepted Answer

A) True 
 B)False

Question 15

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Accepted Answer

The substitution bias causes the CPI to

Question 16

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

Accepted Answer

A)  unemployment rate 
B)  discouraged-worker ratio 
C)  labor force participation rate 
D)  the ratio of minimum wage to inflation 
A)  unemployment rate 
B)  discouraged-worker ratio 
C)  labor force participation rate 
D)  the ratio of minimum wage to inflation

Question 17

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

Accepted Answer

A)  equaled $160 in 1996. 
B)  equaled $160 in 1983. 
C)  rose 160% from the cost of the market basket in the base year. 
D)  rose 60% from the cost of the market basket in the base year. 
A)  equaled $160 in 1996. 
B)  equaled $160 in 1983. 
C)  rose 160% from the cost of the market basket in the base year. 
D)  rose 60% from the cost of the market basket in the base year.

Question 18

The real wage equals the nominal wage ________ the CPI,all times 100.

Accepted Answer

A)  divided by 
B)  times 
C)  minus 
D)  plus 
A)  divided by 
B)  times 
C)  minus 
D)  plus

Question 19

The percent increase in the CPI from one year to the next is a measure of the

Accepted Answer

A)  GDP deflator. 
B)  unemployment rate. 
C)  real interest rate. 
D)  inflation rate. 
A)  GDP deflator. 
B)  unemployment rate. 
C)  real interest rate. 
D)  inflation rate.

Question 20

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest.If the inflation rate was 7%,what was the real interest rate you paid?

Accepted Answer

A)  17 percent 
B)  10 percent 
C)  7 percent 
D)  3 percent 
A)  17 percent 
B)  10 percent 
C)  7 percent 
D)  3 percent

The "new product bias" in the consumer price index refers to the idea that

When the actual inflation rate turns out to be greater than the expected inflation rate,who gains -- the borrower or the lender -- and who loses? Explain why.

Which of the following would be the best measure of the cost of living?

If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

Describe how inflation can be costly even if it is anticipated.

The nominal interest rate plus the inflation rate equals the real interest rate.

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

If inflation is anticipated,some effects of inflation on the redistribution of income can be avoided.

Cyclical unemployment is the result of

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

Real interest rates at times have been negative.Why would anyone lending money agree to a negative real interest rate?

The economy has gone into a recession.You have majored in computer science and,because of the recession,have difficulty in finding a job.Should you go back to school and get a second major?

The real interest rate equals the nominal interest rate ________ the inflation rate.

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

The real wage equals the nominal wage ________ the CPI,all times 100.

The percent increase in the CPI from one year to the next is a measure of the

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest.If the inflation rate was 7%,what was the real interest rate you paid?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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Exam 9: Unemployment and Inflation

The "new product bias" in the consumer price index refers to the idea that

When the actual inflation rate turns out to be greater than the expected inflation rate,who gains -- the borrower or the lender -- and who loses? Explain why.

Which of the following would be the best measure of the cost of living?

If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

Describe how inflation can be costly even if it is anticipated.

The nominal interest rate plus the inflation rate equals the real interest rate.

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

If inflation is anticipated,some effects of inflation on the redistribution of income can be avoided.

Cyclical unemployment is the result of

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

Real interest rates at times have been negative.Why would anyone lending money agree to a negative real interest rate?

The economy has gone into a recession.You have majored in computer science and,because of the recession,have difficulty in finding a job.Should you go back to school and get a second major?

The real interest rate equals the nominal interest rate ________ the inflation rate.

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

The real wage equals the nominal wage ________ the CPI,all times 100.

The percent increase in the CPI from one year to the next is a measure of the

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest.If the inflation rate was 7%,what was the real interest rate you paid?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters