quiz 5 inflation chapter 7

A mortgage that adjusts the nominal interest rate to changing rates of inflation is Question 28 options: 1) An ARM. 2) A PPI. 3) A GDM. 4) A COLA.

1) An ARM.

Which of the following groups is protected from a sudden increase in inflation? Question 11 options: 1) Borrowers who have loans at fixed interest rates. 2) Fixed-income groups. 3) Workers who receive fixed wages under multiyear contracts. 4) People who rent their homes under short-term leases in comparison with those who own their homes.

1) Borrowers who have loans at fixed interest rates.

The uncertainty that results from inflation causes changes in Question 13 options: 1) Consumption, saving, and investment behavior. 2) Saving and investment behavior, but not consumption. 3) Consumption, but not saving and investment behavior. 4) Income, but not consumption.

1) Consumption, saving, and investment behavior.

If the economy is producing at capacity and consumers are willing and able to buy more, this may cause Question 25 options: 1) Demand-pull inflation. 2) Cost-push inflation. 3) Supply-side inflation. 4) The price effect.

1) Demand-pull inflation.

The price index that refers to all final goods and services produced in a country is the Question 19 options: 1) GDP deflator. 2) PPI. 3) CPI. 4) GDP inflator.

1) GDP deflator.

Relative price is Question 4 options: 1) The price of one good in comparison with the price of other goods. 2) A decrease in purchasing power because of rising prices. 3) The amount of income a particular good requires. 4) The current price paid for a good or service.

1) The price of one good in comparison with the price of other goods.

Real GDP is the Question 21 options: 1) Value of final output produced, adjusted for changing prices. 2) Value of final output produced, measured in current prices. 3) Income earned by current factors of production. 4) GDP minus depreciation.

1) Value of final output produced, adjusted for changing prices.

If a bank has already lent money at fixed interest rates, then during a period of higher-than-expected inflation, it experiences Question 10 options: 1) negative real income effects. 2) Hyperinflation. 3) Rising real interest rates. 4) Deflation.

1) negative real income effects.

The Consumer Price Index is Question 14 options: 1) A measure of changes in the average price of all goods and services. 2) A measure of changes in the average price of consumer goods and services. 3) Used to measure the impact of business speculation on consumers. 4) The impact felt by consumers who move into a higher tax bracket because of inflation.

2) A measure of changes in the average price of consumer goods and services.

The core inflation rate excludes Question 30 options: 1) Entertainment and packaging prices. 2) Food and energy prices. 3) Only energy prices for the airlines. 4) Import prices.

2) Food and energy prices.

The most desirable inflation rate is the rate that Question 29 options: 1) Equals the official goal of 3 percent. 2) Has the least effect on the behavior of companies, investors, consumers, and workers. 3) Maximizes the "wealth effect" of inflation. 4) Coincides with an unemployment rate of 0 percent.

2) Has the least effect on the behavior of companies, investors, consumers, and workers.

Assume the CPI increases from 110 to 121, and Manny's nominal income increases from $100,000 to $120,000 over the same period. Manny's real income has Question 15 options: 1) Increased by approximately 12 percent. 2) Increased by approximately 9 percent. 3) Decreased by approximately 8 percent. 4) Remained the same.

2) Increased by approximately 9 percent.

If your rent increases from $1,000 to $1,100 over a period of one year and your income rises from $6,000 to $7,000, your nominal income has Question 9 options: 1) Increased, but your real income has decreased. 2) Increased, and your real income has increased. 3) Decreased, and your real income has decreased. 4) increased, but your real income has remained the same.

2) Increased, and your real income has increased.

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 Question 5 options: 1) Remains constant. 2) Increases. 3) Decreases. 4) More information is required to answer this question.

2) Increases.

If the CPI doesn't measure product quality improvements, the CPI tends to Question 23 options: 1) Understate the inflation rate. 2) Overstate the inflation rate. 3) Understate economic growth. 4) Be artificially low.

2) Overstate the inflation rate.

Deflation is a/an ____________ in the average level of prices of goods and services. Question 3 options: 1) increase 2) decrease 3) stagnation 4) increase followed by a decrease

2) decrease

The Producer Price Index (PPI) is the best index to measure average price changes faced by Question 18 options: 1) Consumers. 2) producers. 3) Importers. 4) Labor unions negotiating COLAs.

2) producers.

A COLA is Question 27 options: 1) A mortgage that adjusts the nominal interest rate to changing rates of inflation. 2) A price index that refers to all goods and services included in GDP. 3) An automatic adjustment of nominal income to the rate of inflation. 4) An inflation rate of at least 200 percent, lasting more than one year.

3) An automatic adjustment of nominal income to the rate of inflation.

For the CPI, the market basket is expressed in terms of what the goods cost in Question 16 options: 1) 1929. 2) 2000. 3) The base period. 4) The optimal period.

3) The base period.

Your real income is Question 8 options: 1) The amount of money you receive during a given time period. 2) Measured in current dollars. 3) The purchasing power of the money you receive. 4) The same as your nominal income in times of high inflation.

3) The purchasing power of the money you receive.

Which of the following is a microeconomic consequence of inflation? Question 12 options: 1) Greater unemployment. 2) Greater real income. 3) The wealth effect.

3) The wealth effect.

Nominal GDP is the Question 20 options: 1) Price index that refers to all goods and services included in GDP. 2) Value of final output produced using American-owned factors of production. 3) Value of final output produced, measured in current prices. 4) Value of final output produced, adjusted for changing prices.

3) Value of final output produced, measured in current prices.

If nominal GDP is $9,600 billion and the GDP deflator is 118.5, real GDP is Question 22 options: 1) $6,586.7 billion. 2) $10,852.7 billion. 3) $3,657.0 billion. 4) $8,101.3 billion.

4) $8,101.3 billion.

All of the following are microeconomic consequences of inflation except Question 6 options: 1) A price effect. 2) An income effect. 3) a wealth effect. 4) A profit effect.

4) A profit effect.

Inflation is Question 1 options: 1) A rise in the price of every good but not any service. 2) An increase in relative prices of all goods and services. 3) A situation in which purchasing power increases. 4) An increase in the average level of prices of goods and services.

4) An increase in the average level of prices of goods and services.

Inflation means Question 2 options: 1) Specific prices are rising, and relative prices are falling. 2) Both relative prices and average prices are rising. 3) Relative prices are rising, but it is not certain what is happening to average prices. 4) Average prices are rising, but it is not certain what is happening to relative prices.

4) Average prices are rising, but it is not certain what is happening to relative prices.

When natural disasters, such as hurricanes on the U.S. Gulf Coast or an earthquake in Japan, disrupt supply chains and push up the costs of production, this may result in Question 26 options: 1) Labor-push inflation. 2) Demand-pull inflation. 3) Wage-pull inflation. 4) Cost-push inflation.

4) Cost-push inflation.

All of the following statements about inflation in the United States are correct except Question 24 options: 1) Since the Great Depression, average prices have risen almost every year. 2) The inflation rate was 13.5 percent in 1980. 3) Prior to World War II, the United States experienced periods of both deflation and inflation. 4) Inflation was at its worst during the Great Depression.

4) Inflation was at its worst during the Great Depression.

The term "nominal income" refers to Question 7 options: 1) Money income adjusted for any change in the price level. 2) Real purchasing power. 3) Real purchasing power deflated for rising prices. 4) Money income measured in current dollars.

4) Money income measured in current dollars.

The percentage of total expenditure spent on a specific product is called Question 17 options: 1) Core inflation. 2) A market basket. 3) A budget. 4) The item weight.

4) The item weight.