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Chapter 21
ECO 252
| Question | Answer |
|---|---|
| According to the March 2012 consumer price index (CPI), the top three consumer expenditure categories are, respectively: | housing, transportation, and food and beverages |
| According to the textbook, the top-grossing movie of all time (adjusted for inflation) is: | Gone with the Wind |
| Deflation is best described as: | when the overall level of prices of goods falls |
| Deflation | would negatively affect producers but positively affect consumers because producers must accept lower prices |
| Inflation in Zimbabwe in 2008: | reached the rate of 80 billion percent per month |
| Inflation is occurring in a nation; the implication(s) of this is/are: | holding nominal wages constant, the real wage would fall |
| Inflation necessarily occurs when: | the overall price level, such as the consumer price index (CPI), rises |
| Inflation occurs: | when the overall level of prices rises |
| It has been shown that increases in the money supply are directly related to the rate of inflation. If the previous statement is true, then: | hyperinflation will normally be associated with large increases in the money supply |
| Menu costs of inflation: | are best described as the costs firms incur by having to change prices either on paper or in the computer. |
| Milton Friedman, who won the Nobel Prize in Economics, characterized inflation as being "high and variable." These characteristics of inflation create problems because: | of future price uncertainty |
| The average inflation rate in the United States from 2000-2012 was about: | 2%. |
| The Bureau of Labor Statistics releases consumer price index (CPI) data: | monthly |
| The chained consumer price index (CPI) tends to more accurately reflect prices by updating the consumer basket of goods: | monthly |
| The housing crisis has some roots in inflation because: | builders confused inflation with an increase in demand and hence overbuilt-a price confusion problem |
| Three accuracy problems with the consumer price index (CPI) are: | substitution, quality changes, and the availability of new goods and services |
| Typically if real wages fall, the quantity demanded of labor rises. If workers agree to 3% wage increases for a four-year period and inflation is more than 3%, then, based on this information alone: | the quantity demanded of labor will increase, because real wages fell |
| Typically the consumer price index (CPI) is calculated by: | checking the prices of about 8,000 goods in about 38 locations across the United States |
| Typically the largest percentage category in the consumer price index (CPI) is: | housing |
| Wages are often tied to expected rates of inflation; thus one reason why inflation is important is that: | inflation creates uncertainty about costs and prices, which affects both employees and employers. |
| What is the consumer price index (CPI)? | The CPI is a measure of the price level based on the consumption patterns of a typical consumer |
| Which statement best represents the purpose for measuring annual inflation (or deflation)? | The main purpose is to find out whether the overall cost of living has changed |
| You are offered two jobs, one in Chicago paying $67,000 and one in Dallas paying $58,000. The price index in Chicago is 110.8, and in Dallas it is 91.5. If real wages are the only consideration, then: | you would definitely take the job in Chicago because the real wage is higher there |
| You get a pay raise and feel richer even though your raise did not keep up with inflation; this is best described as: | money illusion. |
| You own a store and have not raised prices recently-and now your store has more customers. Which statement is correct? | This can be troublesome because you face a price confusion problem: You don't know if the extra business means that you should open another store, or if the crowds are a result of inflation, which has caused all consumers to buy at a faster rate |
Created by:
mghamiter