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

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