Question 1

If the CPI for this year is lower than the CPI for last year,disinflation must have occurred.

Accepted Answer

A) True 
 B)False

Question 2

A decrease in the inflation rate from 10% to 3% implies that average price level has declined.

Accepted Answer

A) True 
 B)False

Question 3

Money illusion is a condition in which people:

Accepted Answer

A)  see money as an illusion for value. 
B)  expect the value of money will illusively surge. 
C)  mistakenly confuse changes in nominal GDP for changes in real GDP. 
D)  mistakenly confuse changes in nominal prices for changes in real prices. 
A)  see money as an illusion for value. 
B)  expect the value of money will illusively surge. 
C)  mistakenly confuse changes in nominal GDP for changes in real GDP. 
D)  mistakenly confuse changes in nominal prices for changes in real prices.

Question 4

When an economy experiences volatile and unpredictable hyperinflation:

Accepted Answer

A)  people will decrease their borrowing. 
B)  people will increase their lending. 
C)  borrowing and lending won't be affected. 
D)  it causes a breakdown of financial intermediation. 
A)  people will decrease their borrowing. 
B)  people will increase their lending. 
C)  borrowing and lending won't be affected. 
D)  it causes a breakdown of financial intermediation.

Question 5

According to the quantity theory,what causes inflation in the long run?

Accepted Answer

A)  unemployment 
B)  unexpected inflation 
C)  money supply growth 
D)  aggregate demand shocks 
A)  unemployment 
B)  unexpected inflation 
C)  money supply growth 
D)  aggregate demand shocks

Question 6

Inflation is an increase in the:

Accepted Answer

A)  value of the dollar. 
B)  value of the New York Stock Exchange. 
C)  average level of prices. 
D)  level of nominal output. 
A)  value of the dollar. 
B)  value of the New York Stock Exchange. 
C)  average level of prices. 
D)  level of nominal output.

Question 7

A major problem with inflation is that after it starts:

Accepted Answer

A)  it always stops quickly because the economy always corrects itself naturally. 
B)  it is easy to stop as long as it is fully expected. 
C)  it is difficult to stop without experiencing high unemployment. 
D)  it can never be stopped with any government policy. 
A)  it always stops quickly because the economy always corrects itself naturally. 
B)  it is easy to stop as long as it is fully expected. 
C)  it is difficult to stop without experiencing high unemployment. 
D)  it can never be stopped with any government policy.

Question 8

Which measure of the average price level most closely corresponds to a student's daily economic activities?

Accepted Answer

A)  consumer price index 
B)  producer price index 
C)  GDP deflator 
D)  household price index 
A)  consumer price index 
B)  producer price index 
C)  GDP deflator 
D)  household price index

Question 9

If the price level in 2018 is 150 and it rises to 165 in 2019,what is the rate of inflation between 2018 and 2019?

Accepted Answer

A)  9% 
B)  10% 
C)  15% 
D)  165% 
A)  9% 
B)  10% 
C)  15% 
D)  165%

Question 10

_____ is a decrease in the average level of prices,whereas _____ is a reduction in the inflation rate.

Accepted Answer

A)  Deflation;disinflation 
B)  Disinflation;deflation 
C)  Stagflation;disinflation 
D)  Deflation;stagflation 
A)  Deflation;disinflation 
B)  Disinflation;deflation 
C)  Stagflation;disinflation 
D)  Deflation;stagflation

Question 11

The Fisher equation implies that if expected inflation is higher than actual inflation,then:

Accepted Answer

A)  the real interest rate will be equal to the equilibrium interest rate. 
B)  the real interest rate will be greater than the equilibrium interest rate. 
C)  the real interest rate will be less than the equilibrium interest rate. 
D)  both the real interest rate and equilibrium interest rate will become undetermined. 
A)  the real interest rate will be equal to the equilibrium interest rate. 
B)  the real interest rate will be greater than the equilibrium interest rate. 
C)  the real interest rate will be less than the equilibrium interest rate. 
D)  both the real interest rate and equilibrium interest rate will become undetermined.

Question 12

When computing the consumer price index,the Bureau of Labor Statistics takes into account changes in the:

Accepted Answer

A)  type of goods but not the quality of goods purchased by the average consumer. 
B)  quality of goods but not the type of goods purchased by the average consumer. 
C)  type of goods and the quality of goods. 
D)  neither the price nor the quality of the goods. 
A)  type of goods but not the quality of goods purchased by the average consumer. 
B)  quality of goods but not the type of goods purchased by the average consumer. 
C)  type of goods and the quality of goods. 
D)  neither the price nor the quality of the goods.

Question 13

The primary reason we think of inflation as bad even when wages rise with it is that it:

Accepted Answer

A)  makes things more expensive for consumers. 
B)  leads to lower real wages. 
C)  distorts the information delivered by prices. 
D)  increases the velocity of money. 
A)  makes things more expensive for consumers. 
B)  leads to lower real wages. 
C)  distorts the information delivered by prices. 
D)  increases the velocity of money.

Question 14

According to the quantity theory of money,the primary cause of inflation is an increase in real GDP.

Accepted Answer

A) True 
 B)False

Question 15

The quantity theory of money predicts that the main cause of inflation is increases in:

Accepted Answer

A)  prices. 
B)  real output. 
C)  consumption. 
D)  the money supply. 
A)  prices. 
B)  real output. 
C)  consumption. 
D)  the money supply.

Question 16

The average price for a basket of goods bought by a typical U.S.consumer is measured by the:

Accepted Answer

A)  consumer price index. 
B)  GDP deflator. 
C)  producer price index. 
D)  exchange rate. 
A)  consumer price index. 
B)  GDP deflator. 
C)  producer price index. 
D)  exchange rate.

Question 17

According to the quantity theory of money,the velocity of money equals the amount of money people spend divided by the product of the price level and the quantity of goods and services they purchase.

Accepted Answer

A) True 
 B)False

Question 18

The quantity theory of money shows the general relationship between inflation,money,real output,and wages.

Accepted Answer

A) True 
 B)False

Question 19

According to the quantity theory of money,the major cause of inflation in the long run is an increase in:

Accepted Answer

A)  the standard of living. 
B)  the velocity of money. 
C)  the growth rate of real GDP. 
D)  the growth rate of the money supply. 
A)  the standard of living. 
B)  the velocity of money. 
C)  the growth rate of real GDP. 
D)  the growth rate of the money supply.

Question 20

Monetizing the debt occurs when a government:

Accepted Answer

A)  raises tax to pay off the debt. 
B)  issues more debt to finance its budget deficit. 
C)  decreases the money supply to pay off the debts. 
D)  pays off its debts by printing money. 
A)  raises tax to pay off the debt. 
B)  issues more debt to finance its budget deficit. 
C)  decreases the money supply to pay off the debts. 
D)  pays off its debts by printing money.

Exam 12: Inflation and the Quantity Theory of Money

If the CPI for this year is lower than the CPI for last year,disinflation must have occurred.

A decrease in the inflation rate from 10% to 3% implies that average price level has declined.

Money illusion is a condition in which people:

When an economy experiences volatile and unpredictable hyperinflation:

According to the quantity theory,what causes inflation in the long run?

Inflation is an increase in the:

A major problem with inflation is that after it starts:

Which measure of the average price level most closely corresponds to a student's daily economic activities?

If the price level in 2018 is 150 and it rises to 165 in 2019,what is the rate of inflation between 2018 and 2019?

_____ is a decrease in the average level of prices,whereas _____ is a reduction in the inflation rate.

The Fisher equation implies that if expected inflation is higher than actual inflation,then:

When computing the consumer price index,the Bureau of Labor Statistics takes into account changes in the:

The primary reason we think of inflation as bad even when wages rise with it is that it:

According to the quantity theory of money,the primary cause of inflation is an increase in real GDP.

The quantity theory of money predicts that the main cause of inflation is increases in:

The average price for a basket of goods bought by a typical U.S.consumer is measured by the:

According to the quantity theory of money,the velocity of money equals the amount of money people spend divided by the product of the price level and the quantity of goods and services they purchase.

The quantity theory of money shows the general relationship between inflation,money,real output,and wages.

According to the quantity theory of money,the major cause of inflation in the long run is an increase in:

Monetizing the debt occurs when a government:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

_ is a decrease in the average level of prices,whereas _ is a reduction in the inflation rate.