Question 1

Inflation ________________ the purchasing power of money.

Accepted Answer

A)  increases
B)  decreases
C)  does not affect
D)  stabilizes

Question 2

Nominal GDP  (in billions of dollars)   GDP deflator  CPI 2001$5,900120.1128.320026,300123.0131.720036,800126.3136.5\begin{array}{rrrr}&	ext { Nominal GDP }\&	ext { (in billions of dollars)  }&	ext { GDP deflator }&	ext { CPI }\\hline2001 & \$ 5,900 & 120.1 & 128.3 \2002 & 6,300 & 123.0 & 131.7 \2003 & 6,800 & 126.3 & 136.5\end{array}200120022003​ Nominal GDP  (in billions of dollars)  $5,9006,3006,800​ GDP deflator 120.1123.0126.3​ CPI 128.3131.7136.5​​

Table 7.2 
GDP for Newland Based on Table 7.2,the real GDP for 2003 was

Accepted Answer

A)  $8,588.4 billion.
B)  $4,981.7 billion.
C)  $9,282.0 billion.
D)  $5,384.0 billion.

Question 3

If consumers attempt to buy more goods than the economy can produce,the result is

Accepted Answer

A)  Unemployment.
B)  Demand-pull inflation.
C)  Cost-push inflation.
D)  The wealth effect.

Question 4

Item weight is the

Accepted Answer

A)  Measure of how much consumers demand a particular item.
B)  Percentage of the typical consumer budget spent on the item.
C)  Significance placed on a particular item by the wealthiest households.
D)  Physical weight of a good or service.

Question 5

Which of the following is not true about your nominal income?

Accepted Answer

A)  It is the amount of money you receive during a given time period.
B)  It is measured in current dollars.
C)  It is not an accurate measure of purchasing power.
D)  It is the same as your real income in times of high inflation.

Question 6

The price index that refers to all final goods and services produced in a country is the

Accepted Answer

A)  GDP deflator.
B)  PPI.
C)  CPI.
D)  GDP inflator.

Question 7

Nominal GDP  (in billions of dollars)   GDP deflator  CPI 2001$5,900120.1128.320026,300123.0131.720036,800126.3136.5\begin{array}{rrrr}&	ext { Nominal GDP }\&	ext { (in billions of dollars)  }&	ext { GDP deflator }&	ext { CPI }\\hline2001 & \$ 5,900 & 120.1 & 128.3 \2002 & 6,300 & 123.0 & 131.7 \2003 & 6,800 & 126.3 & 136.5\end{array}200120022003​ Nominal GDP  (in billions of dollars)  $5,9006,3006,800​ GDP deflator 120.1123.0126.3​ CPI 128.3131.7136.5​​

Table 7.2 
GDP for Newland Based on Table 7.2,the real GDP for 2002 was

Accepted Answer

A)  $7,749.0 billion.
B)  $4,783.6 billion.
C)  $5,122.0 billion.
D)  $8,297.1 billion.

Question 8

Which of the following is a likely macroeconomic consequence of inflation?

Accepted Answer

A)  Focus on long-term planning.
B)  Speculation.
C)  Antitrust issues.
D)  None of the other choices.

Question 9

Money illusion is the

Accepted Answer

A)  Use of nominal dollars rather than real dollars to gauge income or wealth.
B)  Movement of taxpayers into higher tax brackets as nominal income increases.
C)  Focus on real dollars rather than nominal dollars to determine purchasing power.
D)  Uncertainty that occurs because of inflation.

Question 10

All of the following push a country inside its production possibilities curve except

Accepted Answer

A)  A sudden burst of inflation that has not been anticipated.
B)  A sudden burst of deflation that has not been anticipated.
C)  The withholding of resources from the production process because of speculation.
D)  An increase in labor force participation.

Question 11

A mortgage that adjusts the nominal interest rate to changing rates of inflation is

Accepted Answer

A)  An ARM.
B)  A PPI.
C)  A GDM.
D)  A COLA.

Question 12

When production costs increase and producers raise output prices,the result is

Accepted Answer

A)  The price effect.
B)  Unemployment.
C)  Cost-push inflation.
D)  Demand-pull inflation.

Question 13

The core inflation rate involves all price changes including food and energy.
The core inflation rate excludes the prices of food and energy.

Accepted Answer

A) True 
 B)False

Question 14

In order to achieve price stability,inflation must be zero.
As long as inflation is 3 percent or less,price stability has been achieved.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  Demand-pull inflation.
B)  Cost-push inflation.
C)  Supply-side inflation.
D)  The price effect.

Question 16

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

Accepted Answer

A)  Labor-push inflation.
B)  Demand-pull inflation.
C)  Wage-pull inflation.
D)  Cost-push inflation.

Question 17

If the average price level increases by 2 percent this year,price stability has been achieved.
Price stability as defined by the Full Employment and Balanced Growth Act of 1978 is an inflation of 3 percent or less per year.

Accepted Answer

A) True 
 B)False

Question 18

Changes in the relative prices of two goods indicate

Accepted Answer

A)  Inflation.
B)  Nominal price changes adjusted for the inflation in the price of the goods.
C)  That average prices for the period must not be stable.
D)  Changes in the desired mix of output.

Question 19

Which of the following is a macro consequence of a sudden increase in the average level of prices?

Accepted Answer

A)  People on fixed incomes suffer.
B)  Uncertainty is greater.
C)  Nominal income falls by a smaller percentage than real income.
D)  People lengthen their time horizons.

Question 20

Inflation is

Accepted Answer

A)  A rise in the price of every good but not any service.
B)  An increase in relative prices of all goods and services.
C)  A situation in which purchasing power increases.
D)  An increase in the average level of prices of goods and services.

Exam 7: Inflation

If the average price level increases by 2 percent this year,price stability has been achieved. Price stability as defined by the Full Employment and Balanced Growth Act of 1978 is an inflation of 3 percent or less per year.

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Which of the following is a macro consequence of a sudden increase in the average level of prices?

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Inflation is

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In order to achieve price stability,inflation must be zero. As long as inflation is 3 percent or less,price stability has been achieved.

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Which of the following is not true about your nominal income?

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The price index that refers to all final goods and services produced in a country is the

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The core inflation rate involves all price changes including food and energy. The core inflation rate excludes the prices of food and energy.

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Changes in the relative prices of two goods indicate

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If consumers attempt to buy more goods than the economy can produce,the result is

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Money illusion is the

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

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Inflation ________________ the purchasing power of money.

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Which of the following is a likely macroeconomic consequence of inflation?

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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

Correct AnswerverifiedShow Answer

All of the following push a country inside its production possibilities curve except

Correct AnswerverifiedShow Answer

When production costs increase and producers raise output prices,the result is

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A mortgage that adjusts the nominal interest rate to changing rates of inflation is

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Item weight is the

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