Econ 101 - Principles of Macroeconomics » Fall 2021 » Chapter Quiz Chapter 11

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Question #1
Inflation can be measured by all of the following except the
A.   finished goods price index.
B.   consumer price index and GDP deflator.
C.   GDP deflator.
D.   consumer price index.
E.   producer price index.
Question #2
The CPI will be most influenced by a 10 percent increase in the price of which of the following consumption categories?
A.   medical care
B.   housing
C.   transportation
D.   food and beverages
E.   transportation and medical care
Question #3
In 1989, the CPI was 124.0. In 1990, it was 130.7. What was the rate of inflation over this period?
A.   You can't tell without knowing the base year.
B.   0.7 percent
C.   6.7 percent
D.   5.1 percent
E.   5.4 percent
Question #4
Which of the following would likely cause the CPI to rise more than the GDP deflator?
A.   an increase in the price of Fords
B.   an increase in the price of domestically produced fighter planes sold exclusively to Israel
C.   an increase in the price of John Deere tractors
D.   an increase in the price of Hondas produced in Japan and sold in the United States
E.   an increase in the price of tanks purchased by the military
Question #5
The "basket" on which the CPI is based is composed of
A.   products purchased by the typical consumer.
B.   total current production.
C.   raw materials purchased by firms.
D.   consumer production.
E.   none of the above
Question #6
If there is an increase in the price of apples that causes consumers to purchase fewer pounds of apples and more pounds of oranges, the CPI will suffer from
A.   bias due to unmeasured quality change.
B.   bias due to the introduction of new goods.
C.   base-year bias.
D.   substitution bias.
E.   none of the above
Question #7
Suppose your income rises from $19,000 to $31,000 while the CPI rises from 122 to 169. Your standard of living has likely
A.   risen.
B.   fallen.
C.   stayed the same.
D.   You can't tell without knowing the base year.
Question #8
If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is
A.   21 percent.
B.   −4 percent.
C.   3 percent.
D.   10 percent.
E.   4 percent.
Question #9
Which of the following statements is correct?
A.   The real interest rate is the sum of the nominal interest rate and the inflation rate.
B.   The real interest rate is the nominal interest rate minus the inflation rate.
C.   The nominal interest rate is the inflation rate minus the real interest rate.
D.   The nominal interest rate is the real interest rate minus the inflation rate.
E.   none of the above
Question #10
If inflation is 8 percent and the real interest rate is 3 percent, then the nominal interest rate should be
A.   5 percent.
B.   24 percent.
C.   3/8 percent.
D.   11 percent.
E.   −5 percent.
Question #11
Under which of the following conditions would you prefer to be the lender?
A.   The nominal rate of interest is 20 percent and the inflation rate is 25 percent.
B.   The nominal rate of interest is 15 percent and the inflation rate is 14 percent.
C.   The nominal rate of interest is 12 percent and the inflation rate is 9 percent.
D.   The nominal rate of interest is 5 percent and the inflation rate is 1 percent.
Question #12
Under which of the following conditions would you prefer to be the borrower?
A.   The nominal rate of interest is 5 percent and the inflation rate is 1 percent.
B.   The nominal rate of interest is 15 percent and the inflation rate is 14 percent.
C.   The nominal rate of interest is 20 percent and the inflation rate is 25 percent.
D.   The nominal rate of interest is 12 percent and the inflation rate is 9 percent.
Question #13
If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected,
A.   lenders will gain at the expense of borrowers.
B.   neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract.
C.   borrowers will gain at the expense of lenders.
D.   none of the above is true.
Question #14
If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected,
A.   firms will gain at the expense of workers.
B.   workers will gain at the expense of firms.
C.   neither workers nor firms will gain because the increase in wages is fixed in the labor agreement.
D.   none of the above is true.

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