Macroeconomic-Exam3c

Description:	bradley r. schiller
Category:	Business
Created by:	leepao07 on 2009-07-26

Question	Answer
the price of apples compared to the price of other fruit	relative price
computed by the Bureau of Labor Statistics as the average price of consumer goods	consumer price index
the nominal interest rate minus the anticipated rate of inflation	real interest rate
the inflation adjusted value of input	real GDP
calculated based on an increase in the average price level over a particular time period.	inflation rate
used to express the purchasing power of income	real income
a decrease in average prices	deflation
the price index that refers to all final goods and services	GDP deflator
used in lease and wage agreements to protect real income from inflation	cost of living adjustment
established at a rate of less than 3% inflation in the Full Employmentand Balanced Grwoth Act of 1978	price stability
results in a redistribution of income and wealth	inflation
the current dollar value of output	nominal GDP
the movement of taxpayers into higher tax brackets as nominal incomes grow	braket creep
the use of nominal dollars, instead of real dollars, to gauge changes in income or wealth	money illusion
a home loan used to protect the lender during inflationary periods	adjustable rate mortgage
the time period used for comparative analysis	base period
an inflation rate in excess of 200%, lasting at least one year	hyperinflation
changes in the CPI, excluding food and energy prices, is the _________ rate	core inflation
the percentage of a typical consumer budget spent on a good; used to compute inflation indexes.	item weight
income received in a given time period measured in current dollars	nominal income
it is possible for individual prices to rise or fall during periods of inflation	true
relative price changes are a desirable and essential ingredient of the market mechanism	true
inflation only affects the retired since they are on fixed incomes	false
when doctors' fees rise faster than the price for over-the-counter medicines, real income falls for people who visit a doctor relative to those who take over-the-counter medicines instead	true
if the prices of things you buy do not increase, but the inflation rate is 8%, then your real income falls, ceteris paribus.	false
if all individuals were able to anticipate inflation correctly and make appropriate adjustments in their market behavior, there would be no redistribution of real income or real wealth as a reasult of inflation	true
the consumer Price Index usually increases before the Producer Price Index	false
the official goal set by congress for inflation in the US is 3%	true
the CPI overstates the rate of inflation when the quality of the items in the market basket improves	true
a COLA contributes to the redistribution causesd by inflation since it moves people into a higher tax bracket as a result of inflation	false
if the price of DVD players falls 7% during a period when the level of average prices falls 4%, the relative price of DVD players compared with other goods: a)stays the same b)increase c)decrease d)more information is required	c)decreases
when an economy experience a zero rate of inflation, which of the following statements is definitely true? a)real income improve b)there is no redistribution of income and wealth because of inflation c)relative prices do not change d)all of the above	b)there is no redistribution of income and wealth because of inflation
as a result of inflation: a)morale improves b)the crime rate decreases c)tension between labor and management increases d)tension between individuals and the government decreases	c)tension between labor and management increases
which of the following is NOT a consequence of inflation? a)the price effect b)the income effect c)the wealth effect d)the horizon effect	d) the horizon effect
refer to question #5	a) borrowers would experience an increase in real income
which of the followin groups is likely to lose as a result of unanticipated inflation? a)borrowers who have loans at fixed interest rates b)fixed-income groups c)workers under multi-year contracts w/COLAs d)mortgage lenders who mk adjustable-rate mortages	b) fixed-income groups
suppose u get a 5% raise durin a year n which price level rises by 8%. then ovr the yr ur real: a)incme falls, bt ur nominal incme remains unchngd b) nominal incme both fall c)incme fall, bt ur nominal incme rises d)incme rises, bt ur nominal incme falls	c)income falls, but your nominal income rises
refer to question #8	c)investment decisions are more difficult to make because of the uncertain but rising costs
refer to question #9	d)all of the above
which of the following is a macro consequence of inflation? a)shortened time horizons b)decreased uncertainly c)the wealth effect d)the price effect	a)shortened time horizons
speculation durin periods of inflation cn result n: a)ppl buyin resour fr resale latr rathr than usin resour fr currnt prodct b)a movemnt inside institutional product possibilities curve c)ppl buyin gold, silver, etc. instd of capital fr prod d)all above	d) all of the above
at the beginning of 1960 the CPI was 29.6. at the beginning of 2000 it was approximately 170.8. which of the following most closely approximate the forty-year rate of inflation? a)141% b)477% c)350% d)550%	b)477%
if you were interested in charting "price changes" for all goods and services produced, which of the following would be the most appropriate to use? a) the CPI b)the PPI c)the GDP deflator d)the COLA	c) the GDP deflator
the reason tat policy makrs r reluctant to force the economy to a 0% inflation rate is tat: a)unacceptable levels of unemploymnt mite result b)business wuld nt be able to raise prices c)real income would fall d)business would postpone production decisions	a)unacceptable levels of unemployment might result
if the CPI doesn't adjust for product quality improvements, then the CPI tends to: a)understate the inflation rate b)overstate the inflation rate c)understate economic growth d)be artificially low	b) overstate the inflation rate
refer to question #16	a)Prior to World War II, the US experienced periods of both deflation and inflation
COLAs are desired becuase: a)the real value of wages can be maintained, since COLAs correct for the effects of inflation b)COLAs help reduce the rate of inflation c)COLAs help stimulate eimployment d)all of the above	a)the real value of wages can be maintained, since COLAs correct for the effects of inflation
fr an economy n which nominal interest rates r equal to real interest rates, which of followin statemnts is def true? a)anticipatd inflation > actual inflation b)actual inflation > anticipatd inflation c)inflation was anticipatd d)no inflation occurrd	d) no inflation occured
most fundamental function of prices n a market economy is to provide: a)data necessary to cal rates of inflation b)basis for the calculation of sales tax c)information about relative scarcities of resources n goods n services d)max profits to producers	c)Information about the relative scarcities of resources and goods and services
the most desirable inflation rate is the rate: a)at which all prices are constant b)that least affects the behavior of companies, investors, consumers and workers c)that max the "wealth effect" of inflation d)that coincides with an unemployment rate of 0%	b) that least affects the behavior of companies, investors, consumers and workers
during a period of inflation, a person owns no assets and has no COLA to protect his/her income. this is likely to result in a (negative;positive)(wealth;income) effect	negative;income
when consumers seek to buy more goods than the economy can produce, the result is ________ inflation.	demand-pull
when production costs rises for numerous industries, the result is _______ inflation.	cost-push
leakages	taxes, imports, savings
injections	exports, investments, govt spending