AGEC 330 - Quiz 12

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What is the real price of an apple in 5 years if the nominal price is $1.16, and the inflation rate is 3%? $1.00 $1.16 $1.35 $1.13

$1.00

What is the nominal price of an apple in 10 years if the real price is 1$, and the inflation rate is 3%? $0.74 $1.34 $1.06 $1.00

$1.34

What is the nominal price of an orange in 5 years if the real price is $1.50, and the inflation rate is 4%? $1.82 $1.50 $1.23 $1.44

$1.82

What is the real price of a tractor in 7 years if the real price is $150,000, and the inflation rate is 4%? $113,987.67 $150,000.00 $144,000.00 $197,389.77

$113,987.67

What is the real price of a truck in 15 years if the nominal price is $30,000, and the inflation rate is 3%? $29,100.00 $46,739.02 $30,000.00 $19,255.86

$19,255.86

What is the nominal price of a tractor in 7 years if the real price is $200,000, and the inflation rate is 4%? $200,000.00 $192,000.00 $263,186.36 $151,982.56

$263,186.36

What is the nominal price of an apple in 15 years if the real price is $2.5, and the inflation rate is 2%? $3.36 $2.36 $3.30 $2.55

$3.36

What is the nominal price of a truck in 15 years if the real price is $25,000, and the inflation rate is 3%? $38,949.19 $25,000.00 $24,250.00 $16,046.55

$38,949.19

What is the nominal price of an orange in 25 years if the real price is $3, and the inflation rate is 2.5%? $3.08 $5.43 $4.56 $5.56

$5.56

The real interest rate on a bond is 10% and the inflation is expected to be 2%. What is the nominal interest rate on the bond? 9.09% 12% 8% 12.2%

12.2%

The real interest rate on a bond is 8% and the inflation is expected to be 4%. What is the nominal interest rate on the bond? 12.36% 3.85% 8% 4%

12.36%

The real interest rate on a bond is 12% and the inflation is expected to be 3%. What is the nominal interest rate on the bond? 9% 15.36% 8.74% 12%

15.36%

The yield on a bond is 6% and inflation is expected to be 3%. Calculate the real interest rate on the bond. 2.83% 2.91% 3.09% 3%

2.91%

The yield on a bond is 8% and inflation is expected to be 4%. Calculate the real interest rate on the bond. 4% 3.70% 3.85% 4.17%

3.85%

The yield on a bond is 15% and inflation is expected to be 5%. Calculate the real interest rate on the bond. 10% 8.69% 10.53% 9.52%

9.52%

The yield (interest rate) on a bond is 12.5% and the inflation is expected to be 2.5%. What's the real interest rate on the bond? 5% 9.76% 10% 12.19%

9.76%

Which of the followings has nothing to do with inflation? Increase in the general price level Can be measured by CPI Decrease in the general price level Can be caused by an increase in money supply 7

Decrease in the general price level

___________ are prices that reflect today's purchasing power. Nominal Prices Actual Prices Real Prices Stock Prices

Real Prices

Inflation refers to an increase in all the general level of prices for all goods and services in an economy.

True

Deflation is the ________ in all the general level of prices for all goods and services in an economy.

decrease

Cash flows stated in real dollars over time can be converted to nominal dollars; however, cash flows stated in nominal dollars over time cannot be converted to real dollars.

false

Cash flows stated in real dollars over time cannot be converted to nominal dollars.

false

Deflation is the increase in the general price level.

false

If the nominal price of an apple is $1 five years from today and the inflation rate is positive, then the price of an apple today is also $1.

false

If the real price of an apple is $1 five years from today, then the price of an apple today is less than $1.

false

Inflation is an increase in the general level of prices and quantities for all goods and services in an economy.

false

Inflation is the decrease in the general price level.

false

Inflation refers to a decrease in all the general level of prices for all goods and services in an economy.

false

Nominal Prices are the prices with the general price level effect removed.

false

Real Prices are the prices as you observe them (actual amount of U.S. currency (or other types of currency) making up the cash flows).

false

Real Prices are the prices that do not reflect today's purchasing power.

false

The nominal interest rate does not account for the loss of value due to inflation.

false

The nominal interest rate does not account for the time value of money and the loss of value due to inflation.

false

The only way to measure inflation is by the Consumer Price Index (CPI).

false

The only way to measure inflation is with the Gross Domestic Product (GDP) Deflator.

false

The real interest rate accounts for the loss of value due to inflation.

false

The real interest rate does not account for the time value of money.

false

Inflation refers to a/an __________ in all the general level of prices for all goods and services in an economy. Increase Decrease None of the above

increase

In United States, the consumer price index and gross national product are commonly used measures to measure ______. Inflation Deflation None of the above

inflation

Cash flows stated in nominal dollars over time can be converted to real dollars.

true

Cash flows stated in real dollars over time can be converted to nominal dollars.

true

Deflation is the decrease in the general price level.

true

Inflation is an increase in the general level of prices for all goods and services in an economy.

true

Inflation is the increase in the general price level.

true

Nominal Prices are the prices as you observe them.

true

Rate of Inflation is the percentage rate of increase in inflation.

true

Real Prices are the prices that reflect today's purchasing power at a specific point in time.

true

Real Prices are the prices that reflect today's purchasing power.

true

Real Prices are the prices with the general price level effect removed.

true

The nominal interest rate accounts for the time value of money and the loss of value due to inflation.

true

The real interest rate accounts for the time value of money.

true

The two indices to measure inflation are the Consumer Price Index (CPI) and the Gross Domestic Product (GDP) Deflator.

true


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