Question 1

This table shows the values of the Canadian consumer price index (CPI) for the years 1998 - 2005.
 
-Using the data in the table above,the rate of inflation between 2002 and 2003 was

Accepted Answer

A)   2.8%.
B)   2.7%.
C)   3.2%.
D)   4.2%.
E)   5.1%.F) None of the above
G) A) and E)

Question 2

If the market interest rate is 10% and the inflation rate is 3%,then the real interest rate equals

Accepted Answer

A)   3%.
B)   7%.
C)   10%.
D)   13%.
E)   30%.F) C) and D)
G) D) and E)

Question 3

In what circumstances would lenders most benefit?

Accepted Answer

A)   When there is an unanticipated decrease in inflation
B)   When there is an anticipated increase in inflation
C)   When there is an unanticipated increase in inflation
D)   When there is an anticipated decrease in inflation
E)   When there is zero inflationF) A) and D)
G) B) and E)

Question 4

This table shows the values of the Canadian consumer price index (CPI) for the years 1998 - 2005.
 
-Using the data in the table above,the rate of inflation between 2004 and 2005 was

Accepted Answer

A)   1.21%.
B)   1.76%.
C)   2.15%.
D)   2.20%.
E)   2.34%.F) D) and E)
G) A) and E)

Question 5

To counteract inflation,the government could implement all of the following EXCEPT

Accepted Answer

A)   monetary policy.
B)   fiscal policy.
C)   macroeconomic policy.
D)   polices that affect the supply and demand for a specific good.
E)   policies that affect the supply and demand for all goods and services.F) None of the above
G) A) and B)

Question 6

The consumer price index for Macroland consists of only two items: books and pizzas.In 2011,the base year,the typical consumer purchased 5 books for $55 each and 20 pizzas for $6 each.In 2012,the typical consumer purchased 10 books for $80 each and 30 pizzas for $7 each.The consumer price index for 2012 in Macroland equals

Accepted Answer

A)   100.
B)   108.
C)   115.
D)   137.
E)   185.F) None of the above
G) A) and E)

Question 7

Deflation is not a sensible policy goal because deflation

Accepted Answer

A)   increases the purchasing power of money.
B)   decreases the purchasing power of money.
C)   leaves the purchasing power of money unchanged.
D)   is associated with weak or negative economic growth.
E)   promotes investment in capital goods.F) B) and E)
G) A) and B)

Question 8

The consumer price index for Planet Econ consists of only two items: books and hamburgers.In 2011,the base year,the typical consumer purchased 10 books for $20 each and 200 hamburgers for $1 each.In 2012,the typical consumer purchased 12 books for $23 each and 300 hamburgers for $1.15 each.The consumer price index for 2012 on Planet Econ equals

Accepted Answer

A)   100.
B)   115.
C)   125.
D)   135.
E)   155.F) B) and C)
G) A) and E)

Question 9

Suppose that Canada's official consumer price index (CPI) inflation rate contains a measurement error in that it overstates the true cost of living increases of Canadians by 1% per year.This would mean that,during a year in which the CPI inflation rate is 3%,all senior citizens whose federal pensions are indexed to the CPI inflation rate would experience a ________ in their nominal incomes and a _________ in their real incomes.

Accepted Answer

A)   4% increase;1% increase
B)   3% increase;1% decrease
C)   3% increase;1% increase
D)   3% decrease;1% decrease
E)   2% increase;1% increaseF) A) and B)
G) A) and C)

Question 10

Suppose the value of the consumer price index (CPI) is 110 in year 1,121 in year 2,and 133.1 in year 3.Assume also that the price of computers increases by 3% between year 1 and year 2,and by another 3% between year 2 and year 3.The price level is increasing,the inflation rate is _______,and the relative price of computers is _________.

Accepted Answer

A)   increasing;increasing
B)   constant;increasing
C)   constant;decreasing
D)   increasing;decreasing
E)   decreasing;decreasingF) B) and C)
G) A) and C)

Question 11

Low inflation typically means an inflation rate

Accepted Answer

A)   of 0% to 1% per year.
B)   of 1% to 3% per year.
C)   of 3% to 6% per year.
D)   greater than 6% per year.
E)   greater than 500% per year.F) D) and E)
G) A) and B)

Question 12

High inflation typically means an inflation rate

Accepted Answer

A)   of 0% to 1% per year.
B)   of 1% to 3% per year.
C)   of 3% to 6% per year.
D)   greater than 6% per year.
E)   greater than 500% per year.F) C) and E)
G) C) and D)

Question 13

Suppose total expenditures for a typical household in 2002 were $5,500 per month,while the cost of purchasing exactly the same items in 2012 was $7,150.If 2002 is the base year,the consumer price index (CPI) for 2012 equals

Accepted Answer

A)   83.
B)   100.
C)   120.
D)   125.
E)   130.F) A) and D)
G) D) and E)

Question 14

The annual percentage rate of change in the price level is the

Accepted Answer

A)   relative price.
B)   Fisher effect.
C)   price level.
D)   cost of living.
E)   rate of inflation.F) A) and D)
G) B) and E)

Question 15

-The chart shows that the real interest rate is _______ when the nominal interest rate exceeds the inflation rate and _______ when the nominal rate is below the inflation rate.

Accepted Answer

A)   positive;negative
B)   negative;positive
C)   high;low
D)   low;high
E)   zero;zeroF) B) and D)
G) A) and B)

Question 16

It is difficult to engage in long-term financial planning when inflation is

Accepted Answer

A)   high and volatile.
B)   low and stable.
C)   accounted for through indexing.
D)   predictable.
E)   certain.F) A) and C)
G) A) and D)

Question 17

Increases in the rate of inflation will induce consumers to make more frequent trips to the bank to withdraw cash whenever the cost of the extra trips is __________ the benefit of holding less cash subject to purchasing power losses from inflation.

Accepted Answer

A)   greater than
B)   less than
C)   equal to
D)   greater than or less than
E)   twice the consumer price index timesF) A) and E)
G) D) and E)

Question 18

To correct a nominal quantity for changes in the price level,one should

Accepted Answer

A)   add a price index to it.
B)   subtract a price index from it.
C)   divide it by a price index.
D)   multiple it by a price index.
E)   increase it by a percentage equal to the rate of inflation for that year.F) A) and D)
G) A) and C)

Question 19

The Canadian consumer price index fell from 9.2 in 1929 to 7.1 in 1933.Consequently,a Canadian who saved Canadian dollars in a piggybank from 1929 to 1933 received a windfall gain equivalent to a real rate of return of _______ on his piggybank savings.Such a high real return on cash hoarding suggests that savers would have ________ incentive to make their money available for productive investments during periods of ________.

Accepted Answer

A)   17.4%;little;inflation
B)   18.1%;strong;deflation
C)   22.8%;little;deflation
D)   21.5%;strong;inflation
E)   29.6%;little;deflationF) A) and D)
G) None of the above

Question 20

When the overall price level falls in an economy,this is not beneficial to consumers because the economy typically gets mired in a severe recession and

Accepted Answer

A)   hyperinflation distorts price signals.
B)   indexing raises prices.
C)   interest rates increase.
D)   real incomes fall.
E)   nominal incomes fall.F) A) and E)
G) A) and C)

Exam 6: Fiscal Policy

High inflation typically means an inflation rate

Correct Answer
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It is difficult to engage in long-term financial planning when inflation is

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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To correct a nominal quantity for changes in the price level,one should

Correct Answer
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Correct Answer
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To counteract inflation,the government could implement all of the following EXCEPT

Correct Answer
verified

-The chart shows that the real interest rate is _ when the nominal interest rate exceeds the inflation rate and _ when the nominal rate is below the inflation rate.

Correct Answer
verified

This table shows the values of the Canadian consumer price index (CPI) for the years 1998 - 2005. -Using the data in the table above,the rate of inflation between 2002 and 2003 was

Correct Answer
verified

Low inflation typically means an inflation rate

Correct Answer
verified

Suppose total expenditures for a typical household in 2002 were $5,500 per month,while the cost of purchasing exactly the same items in 2012 was $7,150.If 2002 is the base year,the consumer price index (CPI) for 2012 equals

Correct Answer
verified

In what circumstances would lenders most benefit?

Correct Answer
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Correct Answer
verified

This table shows the values of the Canadian consumer price index (CPI) for the years 1998 - 2005. -Using the data in the table above,the rate of inflation between 2004 and 2005 was

Correct Answer
verified

If the market interest rate is 10% and the inflation rate is 3%,then the real interest rate equals

Correct Answer
verified

Deflation is not a sensible policy goal because deflation

Correct Answer
verified

When the overall price level falls in an economy,this is not beneficial to consumers because the economy typically gets mired in a severe recession and

Correct Answer
verified

Increases in the rate of inflation will induce consumers to make more frequent trips to the bank to withdraw cash whenever the cost of the extra trips is __________ the benefit of holding less cash subject to purchasing power losses from inflation.

Correct Answer
verified

The annual percentage rate of change in the price level is the

Correct Answer
verified

Exam 6: Fiscal Policy

High inflation typically means an inflation rate

Correct AnswerverifiedShow Answer

It is difficult to engage in long-term financial planning when inflation is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To correct a nominal quantity for changes in the price level,one should

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To counteract inflation,the government could implement all of the following EXCEPT

Correct AnswerverifiedShow Answer

-The chart shows that the real interest rate is _______ when the nominal interest rate exceeds the inflation rate and _______ when the nominal rate is below the inflation rate.

Correct AnswerverifiedShow Answer

This table shows the values of the Canadian consumer price index (CPI) for the years 1998 - 2005. -Using the data in the table above,the rate of inflation between 2002 and 2003 was

Correct AnswerverifiedShow Answer

Low inflation typically means an inflation rate

Correct AnswerverifiedShow Answer

Suppose total expenditures for a typical household in 2002 were $5,500 per month,while the cost of purchasing exactly the same items in 2012 was $7,150.If 2002 is the base year,the consumer price index (CPI) for 2012 equals

Correct AnswerverifiedShow Answer

In what circumstances would lenders most benefit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

This table shows the values of the Canadian consumer price index (CPI) for the years 1998 - 2005. -Using the data in the table above,the rate of inflation between 2004 and 2005 was

Correct AnswerverifiedShow Answer

If the market interest rate is 10% and the inflation rate is 3%,then the real interest rate equals

Correct AnswerverifiedShow Answer

Deflation is not a sensible policy goal because deflation

Correct AnswerverifiedShow Answer

When the overall price level falls in an economy,this is not beneficial to consumers because the economy typically gets mired in a severe recession and

Correct AnswerverifiedShow Answer

Increases in the rate of inflation will induce consumers to make more frequent trips to the bank to withdraw cash whenever the cost of the extra trips is __________ the benefit of holding less cash subject to purchasing power losses from inflation.

Correct AnswerverifiedShow Answer

The annual percentage rate of change in the price level is the

Correct AnswerverifiedShow Answer

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-The chart shows that the real interest rate is _ when the nominal interest rate exceeds the inflation rate and _ when the nominal rate is below the inflation rate.

Correct Answer
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Correct Answer
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