Question 1

Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 10 percent,

Accepted Answer

A)   the lender benefits from inflation, while the borrower loses from inflation.
B)   the borrower benefits from inflation, while the lender loses from inflation.
C)   neither the borrower nor the lender benefits from inflation.
D)   both the borrower and the lender lose from inflation.E) B) and D)
F) B) and C)

Question 2

The best definition of inflation is a(n) :

Accepted Answer

A)   decrease in the general price level.
B)   increase in the price of one important commodity such as food.
C)   persistent increase in the general level of prices as measured by a price index.
D)   increase in the purchasing power of the dollar.E) A) and D)
F) None of the above

Question 3

One way the consumer price index (CPI)  differs from the GDP chain price index is that the CPI:

Accepted Answer

A)   uses current year quantities of goods and services.
B)   includes separate market baskets of goods and services for both base and current years.
C)   includes only goods and services bought by typical urban consumers.
D)   is bias free.E) B) and C)
F) A) and D)

Question 4

Suppose that your income during Year X was $50,000, and the CPI for Year X was 150 (base year = Z=100) . Back in Year Z your income was $30,000. Has your real income increased or decreased from Z to year X? By how much?

Accepted Answer

A)   Increased by $5,000.
B)   Increased by $3,333.
C)   Decreased by $5,000.
D)   Decreased by $3,333.E) C) and D)
F) A) and D)

Question 5

Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index (CPI)  is currently 110. This indicates the price of the market basket of goods and services is now:

Accepted Answer

A)   $110.
B)   $1,000.
C)   $1,100.
D)   $1,225.E) A) and C)
F) A) and D)

Question 6

Demand-pull inflation is due to:

Accepted Answer

A)   minimum wage laws.
B)   labor cost increases.
C)   excess total spending.
D)   tax increase.E) A) and D)
F) A) and B)

Question 7

Suppose the consumer price index (CPI)  for Year X is 130. This means the average price of goods and services is:

Accepted Answer

A)   currently $130.
B)   130 percent more in Year X than in the base year.
C)   130 percent more in the base year than in Year X.
D)   priced at 30 percent more in Year X than in the base year.E) A) and B)
F) A) and C)

Question 8

If the consumer price index (CPI)  in Year X was 300 and the CPI in Year Y was 325, the rate of inflation for Year Y was:

Accepted Answer

A)   325 percent.
B)   25 percent.
C)   5 percent.
D)   8 percent.E) All of the above
F) A) and D)

Question 9

Who is hurt and who benefits from inflation? Why?

Accepted Answer

Inflation hurts those on fixed incomes a...

Question 10

Consider borrowers and lenders who agree to loans with fixed nominal interest rates. If inflation is higher than what the borrowers and lenders expected, then who benefits from lower real interest rates?

Accepted Answer

A)   Only the borrowers benefit.
B)   Only the lenders benefit.
C)   Both borrowers and lenders benefit.
D)   Neither borrowers nor lenders.E) A) and B)
F) A) and C)

Question 11

Which of the following is true about inflation?

Accepted Answer

A)   Inflation promotes social harmony by uniting people against the government.
B)   Inflation is more damaging if it is anticipated.
C)   Accurate anticipation of inflation is possible for everyone who is well informed about economic events.
D)   Those who lend money at a rate below the rate of inflation suffer economic losses.E) C) and D)
F) None of the above

Question 12

How is inflation typically measured? What are the different types of inflation? Why is it important to know which type of inflation we may be experiencing?

Accepted Answer

Inflation is typically measured by the C...

Question 13

Tina Eckstrom and her husband bought a deferred annuity that started paying them $700 a month in retirement benefits. They, along with millions of other people who live on fixed incomes, are examples of:

Accepted Answer

A)   those who are responsible for inflation.
B)   the big winners from inflation.
C)   the big losers from inflation.
D)   the paradox of thrift.E) All of the above
F) A) and D)

Question 14

Which of the following statements is true ?

Accepted Answer

A)   Deflation is an increase in the general level of prices.
B)   The consumer price index (CPI)  measures changes in the average prices of consumer goods and services.
C)   The real interest rate equals the nominal rate of interest plus the inflation rate.
D)   Real income is the actual number of dollars received over a period of time.E) A) and C)
F) A) and B)

Question 15

Consider an economy with only two goods: bread and wine. In 1982, the typical family bought 4 loaves of bread at 50¢ per loaf and 2 bottles of wine for $9 per bottle. In Year X, bread cost 75¢ per loaf and wine cost $10 per bottle. The CPI for Year X (using a 1982 base year)  is:

Accepted Answer

A)   100.
B)   115.
C)   126.
D)   130.E) C) and D)
F) A) and C)

Question 16

Hyperinflation refers to a situation in which:

Accepted Answer

A)   prices are rising extremely rapidly.
B)   prices are falling extremely rapidly.
C)   the price level is extremely high.
D)   the price level is extremely low.E) A) and B)
F) A) and D)

Exam 17: Inflation

Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index (CPI) is currently 110. This indicates the price of the market basket of goods and services is now:

Correct Answer
verified

Who is hurt and who benefits from inflation? Why?

Correct Answer
verified
Inflation hurts those on fixed incomes a...
View Answer

Consider borrowers and lenders who agree to loans with fixed nominal interest rates. If inflation is higher than what the borrowers and lenders expected, then who benefits from lower real interest rates?

Correct Answer
verified

Suppose that your income during Year X was $50,000, and the CPI for Year X was 150 (base year = Z=100) . Back in Year Z your income was $30,000. Has your real income increased or decreased from Z to year X? By how much?

Correct Answer
verified

Consider an economy with only two goods: bread and wine. In 1982, the typical family bought 4 loaves of bread at 50¢ per loaf and 2 bottles of wine for $9 per bottle. In Year X, bread cost 75¢ per loaf and wine cost $10 per bottle. The CPI for Year X (using a 1982 base year) is:

Correct Answer
verified

How is inflation typically measured? What are the different types of inflation? Why is it important to know which type of inflation we may be experiencing?

Correct Answer
verified
Inflation is typically measured by the C...
View Answer

Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 10 percent,

Correct Answer
verified

Which of the following is true about inflation?

Correct Answer
verified

If the consumer price index (CPI) in Year X was 300 and the CPI in Year Y was 325, the rate of inflation for Year Y was:

Correct Answer
verified

Hyperinflation refers to a situation in which:

Correct Answer
verified

Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is:

Correct Answer
verified

Tina Eckstrom and her husband bought a deferred annuity that started paying them $700 a month in retirement benefits. They, along with millions of other people who live on fixed incomes, are examples of:

Correct Answer
verified

Demand-pull inflation is due to:

Correct Answer
verified

Which of the following statements is true ?

Correct Answer
verified

The best definition of inflation is a(n) :

Correct Answer
verified

One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI:

Correct Answer
verified

Exam 17: Inflation

Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index (CPI) is currently 110. This indicates the price of the market basket of goods and services is now:

Correct AnswerverifiedShow Answer

Who is hurt and who benefits from inflation? Why?

Correct AnswerverifiedInflation hurts those on fixed incomes a...View AnswerShow Answer

Consider borrowers and lenders who agree to loans with fixed nominal interest rates. If inflation is higher than what the borrowers and lenders expected, then who benefits from lower real interest rates?

Correct AnswerverifiedShow Answer

Suppose that your income during Year X was $50,000, and the CPI for Year X was 150 (base year = Z=100) . Back in Year Z your income was $30,000. Has your real income increased or decreased from Z to year X? By how much?

Correct AnswerverifiedShow Answer

Consider an economy with only two goods: bread and wine. In 1982, the typical family bought 4 loaves of bread at 50¢ per loaf and 2 bottles of wine for $9 per bottle. In Year X, bread cost 75¢ per loaf and wine cost $10 per bottle. The CPI for Year X (using a 1982 base year) is:

Correct AnswerverifiedShow Answer

How is inflation typically measured? What are the different types of inflation? Why is it important to know which type of inflation we may be experiencing?

Correct AnswerverifiedInflation is typically measured by the C...View AnswerShow Answer

Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 10 percent,

Correct AnswerverifiedShow Answer

Which of the following is true about inflation?

Correct AnswerverifiedShow Answer

If the consumer price index (CPI) in Year X was 300 and the CPI in Year Y was 325, the rate of inflation for Year Y was:

Correct AnswerverifiedShow Answer

Hyperinflation refers to a situation in which:

Correct AnswerverifiedShow Answer

Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is:

Correct AnswerverifiedShow Answer

Tina Eckstrom and her husband bought a deferred annuity that started paying them $700 a month in retirement benefits. They, along with millions of other people who live on fixed incomes, are examples of:

Correct AnswerverifiedShow Answer

Demand-pull inflation is due to:

Correct AnswerverifiedShow Answer

Which of the following statements is true ?

Correct AnswerverifiedShow Answer

The best definition of inflation is a(n) :

Correct AnswerverifiedShow Answer

One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Inflation hurts those on fixed incomes a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Inflation is typically measured by the C...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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