Eco231-302 Exam Part4

(Table: CPI) According to the table, in which of the following years did this country experience disinflation? A) 2001 only B) 2002 only C) both 2001 and 2002 D) neither 2001 nor 2002

A) 2001 only

9. Which of the following correctly represents unexpected disinflation? A) Epi > pi B) Epi < pi C) Epi = pi D) Epi > i

A) Epi > pi

The quantity theory of money: A) describes the general relationship between money, velocity, real output, and prices. B) presents the critical roles of money demand in regulating the level of prices. C) derives the optimal quantity of inflation. D) explains the equilibrium between money supply and money demand.

A) describes the general relationship between money, velocity, real output, and prices.

A measure of the average price received by suppliers is the: A) consumer price index. B) GDP deflator. C) producer price index. D) exchange rate.

C) producer price index.

When an economy experiences volatile and unpredictable hyperinflation: 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

D) it causes a breakdown of financial intermediation.

If the inflation rate falls from 4% in 2005 to 2% in 2006, then: A) disinflation has occurred. B) deflation has occurred. C) the average price level has declined. D) the value of money has increased.

A) disinflation has occurred.

When an increase in the money supply is unexpected by firms and workers, real GDP: A) increases in the short run. B) decreases in the short run. C) increases in the long run. D) decreases in the long run.

A) increases in the short run.

According to the quantity theory of money, a change in the money supply affects: A) real GDP in the short run but not in the long run. B) real GDP in the long run but not in the short run. C) nominal GDP in the short run but not in the long run. D) nominal GDP in the long run but not in the short run.

A) real GDP in the short run but not in the long run.

The velocity of money is: A) the average number of times a dollar is spent on final goods and services in a year. B) a price that has been corrected for inflation. C) when people mistake changes in nominal prices for changes in real prices. D) an increase in the average level of prices.

A) the average number of times a dollar is spent on final goods and services in a year

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

B) 10%

Approximately how many prices of goods and services are measured by the CPI? A) 800,000 B) 80,000 C) 800 D) 80

B) 80,000

Deflation is a decrease in the: A) exchange rate. B) average level of prices. C) inflation rate. D) velocity of money.

B) average level of prices

In times of financial panic, we expect the velocity of money to: A) increase. B) decrease. C) remain relatively constant. D) first increase and then decrease

B) decrease.

The Fisher effect indicates that an increase in the expected inflation rate will cause the nominal rate of interest to: A) remain relatively constant. B) increase by the same amount. C) decrease by the same amount. D) become unpredictable.

B) increase by the same amount.

Suppose a nation's CPI is 150 in Year 1 and 180 in Year 2. What is the rate of inflation? A) 17% B) 15% C) 20% D) 25%

C) 20%

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. What was the approximate inflation rate over the period 2007 to 2008? A) 8.00% B) 21.53% C) 3.86% D) 3.72%

C) 3.86%

If the CPI was 125 last year and is now 135, then the inflation rate last year was: A) 6%. B) 7%. C) 8%. D) 10%.

C) 8%

What effect did reducing U.S. inflation from 13.5% in 1980 to 3% in 1983 have? A) Wealth was shifted from lenders to borrowers. B) The unemployment rate fell to 4%. C) The country experienced a recession. D) Per capita income increased by 18 % in 3 year

C) The country experienced a recession

Deflation is: A) the average number of times a dollar is spent on final goods and services in a year. B) mistaking changes in nominal prices for changes in real prices. C) a decrease in the average level of prices. D) an increase in the average level of prices.

C) a decrease in the average level of prices.

A major problem with inflation is that after it starts: 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.

C) it is difficult to stop without experiencing high unemployment

The Fisher effect is the tendency of: A) real interest rates to rise with expected inflation rates. B) real interest rates to rise with unexpected inflation rates. C) nominal interest rates to rise with expected inflation rates. D) nominal interest rates to rise with unexpected inflation rates.

C) nominal interest rates to rise with expected inflation rates

Which one of the following is NOT a cost of inflation? A) wasted resources associated with price confusion B) higher tax burdens if tax brackets are not adjusted for inflation C) wealth redistribution from private citizens to the government D) an automatic decrease in real wages throughout the period of inflation.

D) an automatic decrease in real wages throughout the period of inflation

What do we call an increase in the average level of prices in an economy? A) recession B) disinflation C) deflation D) inflation

D) inflation

When the velocity of money and real GDP are fixed, increases in the money supply: A) result in lower velocity. B) are impossible because the money supply must also be fixed. C) must cause decreases in the price level. D) must cause increases in the price level.

D) must cause increases in the price level.

The velocity of money is: A) how fast the price level is rising. B) how fast the inflation rate is rising. C) the rate at which money can be printed. D) the average number of times a dollar is spent on final goods and services.

D) the average number of times a dollar is spent on final goods and services