Question 1

Headline inflation is:

Accepted Answer

A)   core inflation with the prices of food and gasoline added in.
B)   limited measure of inflation in the economy.
C)   used only by the media for discussing inflation.
D)   not a generally accepted measure of inflation.E) B) and C)
F) A) and D)

Question 2

The real interest rate is:

Accepted Answer

A)   adjusted for inflation.
B)   the reported interest rate, not adjusted for inflation.
C)   the interest rate paid to savers.
D)   the interest rate charged to borrowers.E) A) and B)
F) A) and C)

Question 3

The idea that aggregate price levels do not affect real outcomes in the economy is called the:

Accepted Answer

A)   neutrality of money.
B)   aggregate price theory.
C)   neutrality of prices.
D)   real output theory.E) C) and D)
F) B) and C)

Question 4

The money supply and velocity of money tell us the:

Accepted Answer

A)   price value of real output.
B)   real output.
C)   nominal value with inflation accounted for.
D)   nominal value of firm output.E) B) and C)
F) All of the above

Question 5

The classical theory of inflation illustrates the relationship among:

Accepted Answer

A)   money supply, output, and the overall level of prices.
B)   spending, saving, and the overall price level.
C)   savings, investment, and the interest rate.
D)   money supply, savings, and investment.E) None of the above
F) A) and B)

Question 6

When an economy is experiencing a negative output gap, it means that the:

Accepted Answer

A)   actual output is less than their potential output.
B)   actual output is more than their potential output.
C)   price level is rising.
D)   price level is falling.E) B) and C)
F) A) and D)

Question 7

Unexpected high inflation redistributes wealth from:

Accepted Answer

A)   those who save to those who borrow.
B)   those who borrow to those who save.
C)   those who borrow to banks.
D)   banks to those who save.E) All of the above
F) A) and B)

Question 8

3, what could be said about the state of the economy? A)  There is higher unemployment than the natural rate. B)  There is lower unemployment than the natural rate. C)  The unemployment rate is just about the natural rate. D)  The unemployment rate is zero." class="answers-bank-image d-inline" rel="preload" > If the economy is represented in the graph shown and is currently at point E3, what could be said about the state of the economy?

Accepted Answer

A)   There is higher unemployment than the natural rate.
B)   There is lower unemployment than the natural rate.
C)   The unemployment rate is just about the natural rate.
D)   The unemployment rate is zero.E) C) and D)
F) A) and B)

Question 9

Which of the following goods' prices are not considered when calculating core inflation?

Accepted Answer

A)   food
B)   housing
C)   clothing
D)   entertainmentE) A) and C)
F) None of the above

Question 10

The Phillips Curve will shift because of:

Accepted Answer

A)   expected inflation.
B)   normal inflation.
C)   hyperinflation.
D)   core inflation.E) B) and C)
F) A) and B)

Question 11

Shoe-leather costs refer to:

Accepted Answer

A)   the money, time, and opportunity used to change prices to keep pace with inflation.
B)   the time, money, and effort one has to spend managing cash in the face of inflation.
C)   being penalized via taxes for making more money in dollars, even though real purchasing power hasn't changed at all.
D)   labor costs associated with inflation.E) None of the above
F) A) and D)

Question 12

Borrowers:

Accepted Answer

A)   gain from inflation, as the value of their debt decreases.
B)   lose with inflation, as the value of their debt decreases.
C)   gain from inflation, as the value of their debt increases.
D)   lose with inflation, as the value of their debt increases.E) A) and D)
F) A) and C)

Question 13

Cost pull inflation occurs when the:

Accepted Answer

A)   price of a key input increases suddenly.
B)   price level changes in response to changes in the business cycle.
C)   price of necessity goods increases suddenly.
D)   business cycle becomes sporadic and unpredictable.E) A) and B)
F) C) and D)

Question 14

The worst hyperinflation ever recorded happened in:

Accepted Answer

A)   Hungary.
B)   Brazil.
C)   Zimbabwe.
D)   Germany.E) A) and B)
F) C) and D)

Question 15

Deflation is:

Accepted Answer

A)   a sustained rise in the aggregate price level.
B)   negative inflation.
C)   as common as inflation.
D)   a decline in inflation.E) A) and B)
F) A) and C)

Question 16

When the economy is experiencing a negative output gap:

Accepted Answer

A)   some people and some capital are unemployed.
B)   the economy may be in a recession.
C)   there is little inflationary pressure due to low demand.
D)   All of these statements are true.E) B) and C)
F) A) and D)

Question 17

The total amount of output a country could reasonably produce if all of its people and capital resources were fully engaged is called:

Accepted Answer

A)   potential output.
B)   full output.
C)   positive output gap.
D)   economic growth.E) A) and C)
F) C) and D)

Question 18

Holding a currency to the gold standard works:

Accepted Answer

A)   to the advantage of savers at the expense of borrowers.
B)   to the advantage of borrowers at the expense of savers.
C)   for no one, and hurts both savers and borrowers from access to money.
D)   for everyone, benefiting both savers and borrowers.E) A) and B)
F) B) and C)

Question 19

More recently, the velocity of money was:

Accepted Answer

A)   higher during the housing boom and lower during the recession that followed.
B)   lower during the housing boom and higher during the recession that followed.
C)   consistently higher than the historical trend since the mid-1980s.
D)   consistently lower than the historical trend since the early 1990s.E) None of the above
F) A) and C)

Question 20

The quantity theory of money relies on which variable to remain constant?

Accepted Answer

A)   Velocity of money
B)   Money supply
C)   Price level
D)   Aggregate spending.E) A) and B)
F) None of the above

Exam 16: Inflation

The worst hyperinflation ever recorded happened in:

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The quantity theory of money relies on which variable to remain constant?

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The real interest rate is:

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When the economy is experiencing a negative output gap:

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If the economy is represented in the graph shown and is currently at point E3, what could be said about the state of the economy?

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The Phillips Curve will shift because of:

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Headline inflation is:

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Borrowers:

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Holding a currency to the gold standard works:

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The idea that aggregate price levels do not affect real outcomes in the economy is called the:

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Shoe-leather costs refer to:

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The money supply and velocity of money tell us the:

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When an economy is experiencing a negative output gap, it means that the:

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More recently, the velocity of money was:

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Which of the following goods' prices are not considered when calculating core inflation?

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Deflation is:

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The total amount of output a country could reasonably produce if all of its people and capital resources were fully engaged is called:

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The classical theory of inflation illustrates the relationship among:

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Cost pull inflation occurs when the:

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Unexpected high inflation redistributes wealth from:

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If the economy is represented in the graph shown and is currently at point E₃, what could be said about the state of the economy?

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