Chapter 7 macro

Which one of the following statements about the United States true?

Prior to WWII, the US experienced periods of both deflation and inflation

Income in constant dollars is

Real income

Changes in relative prices may occur in a period of

Stable prices, inflation or deflation.

For the CPI, the market is expressed in terms of what the goods cost in

The base period

The percentage of total expenditure spent on a specific product is called

The item weight

Money illusion is the

Use of nominal dollars rather than real dollars to gauge income or wealth.

Real gdp is the

Value of final output produced, adjusted for changing prices.

If the price of iPods rises 10 percent during a year when the level of average prices rises 3 percent, the relative price of iPods compared with other goods

increases

If nominal GDP is $9,600 billion and the GDP deflator is 118.5, real GDP is

$8,101.3 billion

The best price index to use in calculating real GDP is

GDP deflator

During the time period in figure 7.1, country A

Had no need for COLAs.

price stability

Has been officially set by Congress at 3% or less

All of the following are microeconomic consequences of inflation except

the profit effect

At the beginning of 2006 the CPI was 216.2. At the beginning of 2007, it was 225.1. What was the rate of inflation in 2006?

4.1 percent

When there is no deflation or inflation,

Average prices do not change.

To compute the real income of a household, the index that should be used is the

Consumer Price Index (CPI)

If the economy is producing at capacity and consumers are willing and able to buy more even more goods, this may cause

Demand pull inflation

Comparing changes in relative prices is more useful than examining average prices in

Determining the redistribution of income.

If the price of your cellphone service increases from $70 to $105 over a period of one year and your income rises from $1500 to 1525, your nominal income has

Increased, but your real income has decreased.

All of the following statements about inflation in the US are correct except

Inflation was at its worst during the Great Depression

The GDP deflator

Is the price index based on a fixed basket of goods and services for the government.

Inflation ________________ the purchasing power of money.

decreases

A decrease in the average level of prices of goods and services is

deflation

Real income is

nominal income adjusted for inflation

Which of the following is a microeconomic consequence of inflation

wealth effect