Macro Economics Chapter 07 Quiz

Question 1

Inflation is an increase in:
A: prices of all products in the economy.
B: homes, autos and basic resources.
C: the general price level of products.
D: none of these.

Answer 1

C

Question 2

Losers from inflation include: 
A: Savers and borrowers.
B: landlords and the government.
C: borrowers and the government.
D: those on a fixed income and borrowers.
E: those on a fixed income and savers.

Answer 2

E

Question 3

Union contracts with built-in cost-of-living adjustments and home mortgages that vary with the rate of inflation are:
A: inappropriate ways of combating inflation.
B: examples of bracket creep.
C: means of implementing fiscal policy.
D: steps that can be taken to decrease the adverse impacts of inflation.
E. examples of failed discarded policies of the 1970s.

Answer 3

D

Question 4

Which one of the following groups benefits from inflation? 
A: Borrowers.
B: Savers.
C: Landlords.
D: Lenders.

Answer 4

A

Question 5

Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index (CPI) is currently 110. This indicates the price of the market basket of goods and services is now: 
A: $110.
B: $1,000.
C: $1,100.
D: $1,225.

Answer 5

C

Question 6

Deflation means a decrease in:
A: the rate of inflation.
B: the prices of all products in the economy.
C: homes, autos, and basic resources.
D: the general level of prices in the economy.

Answer 6

D

Question 7

When the inflation rate rises, the purchasing power of nominal income:
A: remains unchanged.
B: decreases.
C: increases.
D: changes by the inflation rate minus one.

Answer 7

B

Question 8

The real interest rate is defined as the:
A: actual interest rate.
B: fixed-rate on consumer loans.
C: nominal interest rate minus the inflation rate.
D: expected interest rate minus the inflation rate

Answer 8

C

Question 9

Demand-pull inflation occurs: 
A: at or close to full employment.
B: because of excess total spending.
C: When "too much money is chasing too few goods."
D: all of these.

Answer 9

D

Question 10

Cost-push inflation is due to:
A: too much money chasing too few goods”.
B: the economy operating at full employment.
C: increases in production costs.
D: all of these.

Answer 10

C