Econ 102 - Principles of Macroeconomics » Fall 2022 » Inflation Quiz

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Question #1
The reason that inflation rarely harms workers is that
A.   nominal income falls as prices rise.
B.   wages fall when prices rise.
C.   wages rise at the same time prices rise.
D.   the minimum wage rate automatically rises when the price level rises.
Question #2
Inflation
A.   is a general price level increase
B.   means that all goods experience an increase in price
C.   rarely occurs in the U.S. economy
D.   is caused by the price of one good increasing
Question #3
If ten years ago the price of a movie ticket was $5 and the average hourly wage was $10, and today the price of a movie ticket is $8 and the average hourly wage is $20, then
A.   movies are now relatively cheaper in terms of work hours.
B.   the relative price of movies has remained constant.
C.   movies are now relatively more expensive in terms of work hours.
D.   workers now need to work longer hours to earn one movie ticket.
Question #4
When a lender underestimates the rate of inflation,
A.   the real rate of interest will be higher than expected.
B.   The borrower wins.
C.   purchasing power is redistributed to the lender.
D.   the nominal interest rate was set too high.
Question #5
If both borrowers and lenders anticipate the rate of inflation correctly, then
A.   borrowers will lose real income.
B.   lenders will lose real income.
C.   neither borrowers nor lenders will lose real income.
D.   both borrowers and lenders will lose real income.
Question #6
If you as a lender want an increase in purchasing power of 4 percent from making a loan and you set the nominal interest rate at 9 percent, then your
A.   expected rate of inflation is 5 percent.
B.   real rate of interest is 36 percent.
C.   expected rate of inflation is 13 percent.
D.   real rate of interest is 13 percent.
Question #7
If wages rise by 12 percent at the same time prices rise by 3 percent, then the increase in real wages is equal to
A.   9 percent.
B.   3 percent.
C.   6 percent.
D.   12 percent.
Question #8
In the period of U.S. history known as the Great Depression, the rate of inflation was generally
A.   positive
B.   increasing rapidly
C.   uncertain
D.   negative
Question #9
When comparing the costs of inflation to society, it is important to distinguish between
A.   real versus nominal inflation.
B.   expected versus unexpected inflation.
C.   high price levels and low price levels.
D.   low versus high rates of inflation.
Question #10
The nominal interest rate is the sum of the
A.   expected rate of inflation and the rate of price level increase.
B.   historic rate of inflation and the expected rate of inflation.
C.   real interest rate and the expected rate of inflation.
D.   real interest rate and the historic rate of inflation.
Question #11
During inflationary periods
A.   the real value of money rises.
B.   the real value of money remains constant.
C.   the purchasing power of money rises.
D.   the real value of money falls.
Question #12
Older Americans living on a pension and therefore on a fixed income, tend to be made
A.   worse off when prices fall without a cost of living adjustment.
B.   worse off when prices rise without a cost of living adjustment.
C.   better off when prices rise.
D.   better off when inflation rates rise.
Question #13
The rate of interest written on a contract between a borrower and a lender is the
A.   expected interest rate.
B.   nominal interest rate.
C.   real interest rate.
D.   implied interest rate.
Question #14
The real wage rate is defined as the wage rate divided by
A.   the price level.
B.   the money supply.
C.   nominal GDP.
D.   the interest rate.

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