Question 1

Tina Cole and her husband bought a deferred annuity that started paying them $700 a month in retirement benefits.They,along with millions of other people who live on fixed incomes,are examples of:

Accepted Answer

A)   those who are responsible for inflation.
B)   the big winners from inflation.
C)   the big losers from inflation.
D)   the paradox of thrift.
E)   stock market losers.

Question 2

The consumer price index (CPI) :

Accepted Answer

A)   adjusts for changes in product quality.
B)   includes separate market baskets of goods and services for both base and current years.
C)   includes only goods and services bought by typical urban consumer.
D)   uses current year quantities of goods and services.

Question 3

In periods of high inflation,

Accepted Answer

A)   people want to hold on to as much money as possible.
B)   the purchasing power of money is decreasing.
C)   nobody wants to work and earn income.
D)   low nominal interest rates are likely to result.
E)   nobody wants to buy goods and services.

Question 4

Cost-push inflation is due to:

Accepted Answer

A)   labor cost increases.
B)   energy cost increases.
C)   raw material cost increases.
D)   all of the above.

Question 5

Exhibit 13-1 Consumer Price Index
 
-As shown in Exhibit 13-1,the rate of inflation for Year 5 is:

Accepted Answer

A)   4.2 percent
B)   5 percent.
C)   20 percent.
D)   25 percent.

Question 6

The nominal rate of interest is any rate of interest below 3 percent.

Accepted Answer

A) True 
 B)False

Question 7

Demand-pull inflation is most pronounced during a recession (as opposed to the recovery phase of the business cycle).

Accepted Answer

A) True 
 B)False

Question 8

Inflation psychosis and wage-price spirals are two types of hyperinflation.

Accepted Answer

A) True 
 B)False

Question 9

Unlike the GDP deflator,the CPI does not consider goods and services purchased by business and government.

Accepted Answer

A) True 
 B)False

Question 10

During periods of inflation,the general price level of goods and services in the economy rises.

Accepted Answer

A) True 
 B)False

Question 11

Deflation:

Accepted Answer

A)   was prevalent during the oil shocks of the 1970s.
B)   will cause consumers' purchasing power to shrink.
C)   has been persistent in the U.S. economy since the Great Depression.
D)   none of the above.

Question 12

Suppose that your income during Year X was $50,000,and the CPI for Year X was 150 (base year = Z.Back in Year Z your income was $30,000.Has your real income increased or decreased from Z to year X? By how much?

Accepted Answer

A)   Increased by $5,000.
B)   Increased by $3,333.33.
C)   Unchanged.
D)   Decreased by $3,333.33.
E)   Decreased by $5,000.

Question 13

Suppose hypothetically that the consumer price index (CPI) was 150 in Year 1 and was 180 in Year 2.What would be the inflation rate for this period?

Accepted Answer

A)   12 percent.
B)   16.7 percent.
C)   20 percent.
D)   30 percent.

Question 14

A reduction in the rate of inflation is called:

Accepted Answer

A)   deflation.
B)   disinflation.
C)   hyperinflation.
D)   cost-push inflation.

Question 15

Suppose that the consumer price index of a country was 160 at Year X and 168 at the end of Year Y.What was the country's inflation rate during Year Y?

Accepted Answer

A)   5 percent.
B)   8 percent.
C)   60 percent.
D)   68 percent.

Question 16

One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI:

Accepted Answer

A)   uses current year quantities of goods and services.
B)   includes separate market baskets of goods and services for both base and current years.
C)   includes only goods and services bought by typical urban consumers.
D)   is bias free.

Question 17

Demand-pull inflation is due to:

Accepted Answer

A)   minimum wage laws.
B)   labor cost increases.
C)   excess total spending.
D)   tax increase.

Question 18

Who is hurt and who benefits from inflation? Why?

Accepted Answer

Inflation hurts those on fixed incomes,t...

Question 19

As inflation drives up prices,people attempt to find substitutes and adjust what they buy.The resulting substitution bias problem causes the CPI to:

Accepted Answer

A)   overstate the impact of higher prices on consumers.
B)   consistently underestimate the true inflation rate.
C)   omit the benefits of product quality improvements.
D)   have larger fluctuations than other price indexes.

Question 20

The consumer price index (CPI)includes only a market basket of goods and services purchased by the typical urban consumer.

Accepted Answer

A) True 
 B)False

Exam 13: Inflation

One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI:

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The nominal rate of interest is any rate of interest below 3 percent.

Correct AnswerverifiedShow Answer

Inflation psychosis and wage-price spirals are two types of hyperinflation.

Correct AnswerverifiedShow Answer

Suppose that your income during Year X was $50,000,and the CPI for Year X was 150 (base year = Z.Back in Year Z your income was $30,000.Has your real income increased or decreased from Z to year X? By how much?

Correct AnswerverifiedShow Answer

Tina Cole and her husband bought a deferred annuity that started paying them $700 a month in retirement benefits.They,along with millions of other people who live on fixed incomes,are examples of:

Correct AnswerverifiedShow Answer

The consumer price index (CPI)includes only a market basket of goods and services purchased by the typical urban consumer.

Correct AnswerverifiedShow Answer

Demand-pull inflation is due to:

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Deflation:

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Cost-push inflation is due to:

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The consumer price index (CPI) :

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During periods of inflation,the general price level of goods and services in the economy rises.

Correct AnswerverifiedShow Answer

Who is hurt and who benefits from inflation? Why?

Correct AnswerverifiedInflation hurts those on fixed incomes,t...View AnswerShow Answer

Unlike the GDP deflator,the CPI does not consider goods and services purchased by business and government.

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Exhibit 13-1 Consumer Price Index -As shown in Exhibit 13-1,the rate of inflation for Year 5 is:

Correct AnswerverifiedShow Answer

Demand-pull inflation is most pronounced during a recession (as opposed to the recovery phase of the business cycle).

Correct AnswerverifiedShow Answer

A reduction in the rate of inflation is called:

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In periods of high inflation,

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Suppose hypothetically that the consumer price index (CPI) was 150 in Year 1 and was 180 in Year 2.What would be the inflation rate for this period?

Correct AnswerverifiedShow Answer

As inflation drives up prices,people attempt to find substitutes and adjust what they buy.The resulting substitution bias problem causes the CPI to:

Correct AnswerverifiedShow Answer

Suppose that the consumer price index of a country was 160 at Year X and 168 at the end of Year Y.What was the country's inflation rate during Year Y?

Correct AnswerverifiedShow Answer

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Inflation hurts those on fixed incomes,t...
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