Econ 102 - Principles of Macroeconomics » Spring 2020 » iVAT Chapter 18

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Question #1
Asset price inflation occurs when:
A.   the productive capacity of assets declines.
B.   the price of assets decline.
C.   the price of assets grows faster than the productive capacity of those assets.
D.   goods inflation slows.
E.   the productive capacity of assets climb.
Question #2
A way of measuring asset price inflation is to look at the:
A.   nominal GDP growth rate
B.   ratio of net worth to inflation
C.   ratio of net worth to GDP
D.   amount of goods inflation
E.   corporate bond yields
Question #3
Answer the following questions based off of the following information: Net worth 2025: $30 trillion; Net worth 2026: $35 trillion; Nominal GDP 2025: $30 trillion; Nominal GDP 2026: $31 trillion. What is the net worth to GDP ratio in 2026? Was there asset price inflation or deflation between 2025 and 2026?
A.   1.13; There was asset price inflation because the net worth to GDP ratio increased over this time period from 1 to 1.13.
B.   .90; There was asset price inflation because the net worth to GDP ratio increased over this time period from 1 to .90.
C.   1.0; There was asset price inflation because the net worth to GDP ratio increased over this time period from 1 to 1.0.
D.   .90; There was asset price deflation because the net worth to GDP ratio decreased over this time period from 1 to .90.
Question #4
What is one of the negative side effects from asset price inflation?
A.   It can cause GDP to grow more rapidly than the sector that is experiencing asset price inflation.
B.   Asset price inflation can create bubbles and lure human talent and resources into the sector that is experiencing asset price inflation.
C.   It can create perverse incentives where companies are discouraged from making investments in the sector that is experiencing asset price inflation.
D.   Asset price inflation can inflate human ingenuity.
Question #5
Who can benefit from an unexpected increase in inflation?
A.   those who can raise their prices
B.   retirees
C.   no one
D.   those who have debts with varying interest rates
E.   those who have fixed wage increases
Question #6
Who can be hurt by an unexpected increase in inflation?
A.   Those who can raise the prices of the goods they sell.
B.   Those who can't raise their wages or prices.
C.   No one
D.   Those who have wage increases indexed with inflation.
Question #7
If inflation is 10% the nominal interest rate is 15%, and asset price inflation is 10% than the real interest rate is:
A.   5%
B.   0%
C.   35%
D.   25%
E.   15%
Question #8
If a loan contract has a fixed interest rate of 5% while inflation is 3% and productivity gains are 1% what is the real rate of return:
A.   3
B.   2
C.   0
D.   5
E.   8
Question #9
Unexpectedly high inflation hurts:
A.   no one
B.   borrowers
C.   debtors
D.   workers
E.   creditors
Question #10
Unexpectedly high inflation benefits whom:
A.   borrowers
B.   workers
C.   creditors
D.   debtors
E.   no one
Question #11
Unexpected low inflation helps whom:
A.   workers
B.   students
C.   debtors
D.   creditors
E.   capitalists

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