A) will increase by approximately 2 percent
B) will increase by approximately 8 percent
C) will increase by approximately 5 percent
D) will remain the same
E) cannot be calculated without knowing the number of dollars by which her wage increases
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A) expected rate of inflation divided by the nominal interest rate
B) real GDP plus the expected rate of inflation
C) nominal interest rate minus real GDP
D) nominal interest rate minus the expected rate of inflation
E) real GDP multiplied by the expected rate of inflation
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A) Raw materials
B) Imported goods purchased by consumers
C) Machinery purchased by firms
D) Goods purchased by the government
E) Intermediate goods
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A) causes consumers' purchasing power to decline
B) causes sellers' costs to increase
C) causes nominal wages to fall
D) causes purchasing power to be redistributed in haphazard ways
E) has no effect at all on anyone's purchasing power
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A) is the amount that the consumer agrees to pay
B) is always the same as the nominal rate
C) is always greater than the nominal rate
D) is only of concern when serious inflation occurs
E) is the percentage increase in the lender's purchasing power that results from making the loan
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A) are lower than they would be if they were correctly indexed.
B) are higher than they would be if they were correctly indexed.
C) are constant.
D) are decreasing.
E) are under-indexed.
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A) Some goods experience large price changes and the CPI would be too variable if computed by a simple average.
B) Goods differ in their importance in the average consumer's budget.
C) Some goods never experience price changes and the CPI would not be variable enough if computed as a simple average.
D) It would be difficult to compute a price index using a simple average of all prices.
E) Actually,the CPI is a simple average of all prices.
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A) the BLS will change the underlying market basket of goods
B) it is useless
C) it exaggerates the true cost of living
D) it results in underindexation of social security payments
E) it underestimates the true cost of living
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A) 2 percent
B) 4 percent
C) -4 percent
D) 1 percent
E) 0 percent
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A) 100.0
B) 110.0
C) 116.0
D) 105.0
E) 95.2
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A) $13.00
B) $11.82
C) $14.30
D) $11.78
E) $11.48
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A) nominalization
B) realization
C) indexation
D) stabilization
E) depreciation
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A) Shopping several web sites to check prices
B) Changing price tags
C) Re-printing menus
D) The wear and tear on your car from additional trips to the bank
E) All of the above
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A) accurately measures the inflation rate
B) accurately measures the inflation rate except during years when there are major economic shocks like the Arab oil embargo
C) slightly underestimates the inflation rate
D) seriously underestimates the inflation rate
E) overstates the inflation rate
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A) the prices of all consumer goods were higher in 2008 than in 2007
B) the prices of all consumer goods were lower in 2008 than in 2007
C) the price level fell from 2007 to 2008
D) the price level rose from 2007 to 2008
E) the base year was 2001
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A) 10 percent
B) 3 percent
C) 4 percent
D) 7 percent
E) 1 percent
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A) 2.0%
B) 3.0%
C) 1.0%
D) 5.0%
E) 1.5%
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A) will not reduce purchasing power of the money paid back
B) will redistribute purchasing power from borrowers to lenders
C) will not redistribute purchasing power
D) will redistribute purchasing power from to lenders to borrowers
E) cannot be taken into consideration when a loan is negotiated
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A) has occurred in the United States in only three of the past fifty years
B) has occurred throughout most of United States history
C) is also called creeping inflation
D) was the norm in the United States until the end of the Vietnam War
E) has not occurred in the United States since the Great Depression
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A) Services purchased directly by consumers
B) Raw materials
C) Services purchased by the government
D) Machinery purchased by firms
E) Intermediate goods purchased by firms
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