PrQ M18: Practice Quiz - Module 18: The Costs of Inflation

If Jim's income is $80,000 and the price level is 4, then Jim's real income is:

$20,000.

Use Table: Price Levels. What is the rate of inflation from 2013 to 2014?

1.1%

Unanticipated inflation:

helps borrowers and hurts lenders

Over the past year, Eli has been working very hard. His employer has taken notice and is giving Eli a 6% raise in salary. During this past year, overall prices in the economy have increased by 4%. Given this information, Eli's real wage has:

increased by 2%.

The threat of future inflation:

makes people reluctant to lend money for long periods.

If the U.S. dollar were replaced with a "new dollar" at an exchange rate of 1 new dollar for 8 old dollars, then a mortgage of $200,000 would become a debt of 25,000 new dollars.

true

Deflation is a:

a decreasing aggregate price level

When disinflation occurs:

and inflationary expectations do not change, an economy may experience a recession

If the price level increases, real wages will:

decrease

Shoe-leather costs are the costs of:

the increased number of transactions as inflation increases.