MACRO Inflation QUIZ CHPT 9

The real wage equals the nominal wage ____ the CPI, all time 100

divided by

You lend $5,000 to a friend for one year at a nominal interest rate of 10%. Inflation during that year is 5%, As a result, you will receive______ at the end of the year, but that money has a purchasing power of ______.

$5,500; $5,250

Using the following data what was the inflation rate for 2008

3.9%

Which of the following would be the best measure of the cost of living?

Consumer Price Index

The substitution bias in the CPI refers to the idea that consumers ______the quantity of products they buy in response to price, and the CPI does not reflect this and____the cost of the market basket.

change; over-estimates

For any given year, the CPI is the price of the basket of goods and services in the

given year divided by the price of the basket in the base year times 100

In 2016, people receiving Social Security will receive ______________in their benefits.

no increase

Suppose that in 2013, all prices in the economy double and that all wages and salaries have also doubled. In 2013 you

were NO BETTER or WORSE OFF than you were in 2010 as the purchasing power of your salary has remained the same