Econ Mods: 14-15 and 33-34

A Phillips curve implies a negative relationship between: aggregate price level and real GDP. consumption and inflation. consumption and saving. inflation and unemployment. inflation and prices.

inflation and unemployment.

If money income remains the same, while the average price level doubles, then: home mortgage interest rates are likely to fall. real income will fall. nominal interest rates will fall. purchasing power will rise. nominal income will fall.

real income will fall.

If the actual inflation rate is less than the expected inflation rate, then: the lenders gain and the borrowers lose. everyone is worse off from the lower actual inflation. there are higher menu costs due to the lower actual inflation. everyone benefits from the lower actual inflation. the borrowers gain and the lenders lose.

the lenders gain and the borrowers lose.

When the economic situation is such that monetary policy can no longer be used because the nominal rate of interest cannot fall below zero, it is called: the money neutrality. the liquidity preference. the liquidity trap. the money illusion. the revealed preference trap.

the liquidity trap.

If the cost of a market basket is $200 in Year 1 and $230 in Year 2, the price index for Year 2 with a Year 1 base is: 100. 200. 90. 115. 130.

115

Suppose the real interest rate is 2.1% and the nominal interest rate is 5.4%. Then the expected inflation rate is: -3.3%. 7.5%. 2.1%. 5.4%. 3.3%.

3.3%.

Suppose you are told that the short-run Phillips curve has shifted upward. Which of the following must have happened? The LRAS curve has shifted to the right. The SRAS curve has shifted to the right. The AD curve has shifted to the right. The SRAS curve has shifted to the left. The AD curve has shifted to the left.

The SRAS curve has shifted to the left.

Suppose you are told that the short-run Phillips curve has shifted downward. Which of the following must have happened? The AD curve has shifted to the right. The SRAS curve has shifted to the left. The SRAS curve has shifted to the right. The LRAS curve has shifted to the right. The AD curve has shifted to the left.

The SRAS curve has shifted to the right.

Which of the following is true? Unexpected deflation benefits lenders but does not affect borrowers. Unexpected inflation benefits borrowers but does not affect lenders. Unexpected inflation benefits borrowers and hurts lenders. Unexpected inflation benefits lenders and hurts borrowers. Unexpected inflation benefits lenders but does not affect borrowers.

Unexpected inflation benefits borrowers and hurts lenders.

Deflation is when there is: a decrease in unemployment. a decline in wages. a recession. a decreasing aggregate price level. a stock market crash

a decreasing aggregate price level.

Inflation is when there is: a rise in wages. an increase in national income. a rise in the unemployment rate. a rising aggregate price level. an expansion of output.

a rising aggregate price level.

If an economy's short-run Phillips curve shifts up, this is most likely due to: an increase in the unemployment rate. an increase in expected inflation. a change in the inflation rate. an expansionary fiscal policy. a contractionary fiscal policy.

an increase in expected inflation.

The long-run Phillips curve is vertical at the NAIRU because an unemployment rate equal to NAIRU will always lead to zero inflation. any unemployment rate equal to the NAIRU will lead to ever-decelerating inflation. any unemployment rate below the NAIRU will lead to ever-accelerating inflation. any unemployment rate below the NAIRU will lead to ever-decelerating inflation. any unemployment rate above the NAIRU will lead to ever-accelerating inflation.

any unemployment rate below the NAIRU will lead to ever-accelerating inflation.

The consumer price index reflects the: average price of goods and services purchased by consumers. prices of all goods and services computed from the ratio of nominal GDP to real GDP. changes in the prices of goods and services typically purchased by consumers. level of prices for raw materials. level of prices for intermediate goods and services purchased by business.

changes in the prices of goods and services typically purchased by consumers.

The ______ is the most widely used measure of inflation in the United States. consumer price index growth rate of real GDP national income account producer price index GDP deflator

consumer price index

If the Fed reduces the inflation rate from 5% to 3%, it is: decreasing the unemployment rate. engaging in disinflation. increasing employment. following a policy rule. raising economic growth.

engaging in disinflation.

An increase in the price level that is extremely rapid (say 400% per year) is called: hyperinflation. hyperdeflation. inflation. disinflation. deflation.

hyperinflation.

When inflation rises quickly: both borrowers and lenders will benefit. lenders will be hurt and those on fixed incomes will benefit. both borrowers and lenders will be hurt. borrowers will be hurt and lenders will benefit. lenders will be hurt and borrowers will benefit.

lenders will be hurt and borrowers will benefit.

When there is deflation in the economy, there are winners and losers; for example: savings account holders lose but the banks gain at their expense. bond and stock holders lose while the brokerage company gains. landlords lose but people paying rents gain from the situation. mortgage holders lose but banks awaiting mortgage payments benefit. workers lose, while employers gain.

mortgage holders lose but banks awaiting mortgage payments benefit.

Unanticipated inflation: decreases uncertainty about the future. benefits potential home buyers. helps lenders. increases the value of money. reduces the value of the debt owed by borrowers.

reduces the value of the debt owed by borrowers.

If workers expect a lower rate of inflation, the short-run Phillips curve will: remain constant, but there will be a movement up the curve. shift down. be unaffected. shift up. remain constant, but there will be a movement down the curve.

shift down.

The aggregate price level is: the average price of shares on the stock market. the average rate of inflation. the overall level of prices in the economy. the overall level of wages in the economy. the average price of commodities.

the overall level of prices in the economy.

Inflation can be measured by: the absolute change in the CPI. the percentage change in nominal GDP. the absolute change in the GDP deflator. the percentage change in the CPI. the percentage change in real GDP.

the percentage change in the CPI.

The nominal interest rate equals: the real interest rate plus the expected rate of inflation. the real interest rate times the expected rate of inflation. the real interest rate when inflation is correctly anticipated. the real interest rate divided by the expected rate of inflation. the real interest rate minus the expected rate of inflation.

the real interest rate plus the expected rate of inflation.

Stagflation is a combination of: budget deficits and trade deficits. restrictive trade policies and inflation. unemployment and higher real interest rates. unemployment and inflation. unemployment and higher taxes.

unemployment and inflation.