Chapter 21 Assignment Question Set Eco 252

If wages increase faster than prices, it is likely because of: ___.

Productivity increases

If the CPI is 93 in 2014 and 97 in 2015, calculate the rate of inflation from 2014 to 2015.

not 4.12 or 4.0

The inflation rate is measured as the percentage change in the index over a time period. What variable should be plugged in for the denominator? (P2 - (P1)

not P2 or CPI

What does it mean If the price level in year 10 was 150, and the price level in year 20 is 200?

not Prices have risen by 50 percentage points. or prices have risen by about 25%

The inflation rate can be measured by: ___.

not Taking the real GDP deflator and subtracing the previous years deflator number. or none of the above

What is the Consumer Price Index?

not The median price of a basket of goods and services that any consumer would use.

Money illusion is the phrase used to describe when people mistake ___.

Changes in nominal prices with changes in real prices

Inflation interferes with the price system in which costly way?

Inflation distorts price signals, making it difficult for consumers to tell if the price increase is due to scarcity or inflation, and react appropriately

What are some of the hidden costs of inflations?

Inflation re-distrubutes wealth and interferes with financial intermediation

What is inflation?

When average prices throughout the economy is increasing.