Question 1

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%.But, if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Accepted Answer

A)  2 percent.
B)  4 percent.
C)  6 percent.
D)  10 percent.E) None of the above
F) A) and B)

Question 2

Recently a labour union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true because the union had been acquiring significant increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

Accepted Answer

A)  Yes, because when you have a large nominal income your standard of living automatically increases.
B)  No, because real income may fall if price increases are more proportionately than the increase in nominal income.
C)  No, because real income may fall if price increases are less proportionately than the increases in nominal income.
D)  Yes, because real income may fall if price increases are less proportionately than the increases in nominal income.E) None of the above
F) A) and D)

Question 3

A statement that is often used to describe demand-pull inflation is:

Accepted Answer

A)  a rising tide lifts all boats.
B)  money is easily earned, but not easily saved.
C)  too much spending chasing too few goods.
D)  there is no such thing as a free lunch.E) B) and D)
F) A) and C)

Question 4

Which of the following statements is correct? Unanticipated inflation:

Accepted Answer

A)  arbitrarily "taxes" fixed-income groups.
B)  increases the real value of savings.
C)  increases the purchasing power of the dollar.
D)  benefits creditors at the expense of debtors.E) None of the above
F) A) and C)

Question 5

The unemployment rate in an economy is 7.5 percent.The total population of the economy is 250 million and the size of the civilian labour force is 180 million.The number of employed workers in this economy is:

Accepted Answer

A)  13.5 million.
B)  15.7 million.
C)  166.5 million.
D)  174.6 million.E) A) and B)
F) All of the above

Question 6

Full-employment output is also called:

Accepted Answer

A)  zero-unemployment output.
B)  equilibrium output.
C)  potential output.
D)  zero-savings output.E) B) and D)
F) B) and C)

Question 7

If the nominal interest rate is 12 percent and the real interest rate is 8 percent, then the inflation premium is:

Accepted Answer

A)  8 percent.
B)  12 percent.
C)  4 percent.
D)  20 percent.E) All of the above
F) A) and C)

Question 8

In an economy nominal GDP is $4,000 billion.The actual unemployment rate is 8 percent and the natural rate of unemployment is 6 percent.According to Okun's law there will be:

Accepted Answer

A)  $80 billion lost in potential output.
B)  $100 billion lost in potential output.
C)  $160 billion lost in potential output.
D)  $300 billion lost in potential output.E) B) and D)
F) A) and C)

Question 9

Unanticipated inflation arbitrarily:

Accepted Answer

A)  subsidizes those who receive fixed money incomes.
B)  penalizes those who receive fixed money incomes.
C)  penalizes those who borrow money.
D)  benefits those who save money.E) A) and B)
F) B) and C)

Question 10

During a serious recession we would expect output to fall the most in:

Accepted Answer

A)  the alcoholic beverage industry.
B)  the clothing industry.
C)  agriculture industry.
D)  the machinery and equipment industry.E) None of the above
F) A) and D)

Question 11

For every 1 percent that the actual unemployment rate exceeds the natural rate, there is generated a 2 percent GDP gap.This is a statement of:

Accepted Answer

A)  Stratford's law.
B)  Okun's law.
C)  the law of nominal incomes.
D)  the rule of 70.E) A) and B)
F) B) and C)

Question 12

Real income can be determined by:

Accepted Answer

A)  dividing the price level by nominal income.
B)  inflating nominal income for inflation.
C)  dividing the annual rate of inflation into the number "70."
D)  dividing the nominal income by the price index.E) All of the above
F) A) and B)

Question 13

During 1993-1994, Democratic Republic of Congo has experienced an inflation rate of more than sixty-nine thousand percent per year.This economic condition would best be described as:

Accepted Answer

A)  a wage-price inflationary spiral.
B)  a cost-of-living adjustment.
C)  cost-push inflation.
D)  hyperinflation.E) None of the above
F) C) and D)

Exam 9: Part B: Business Cycles, Unemployment, and Inflation

Which of the following statements is correct? Unanticipated inflation:

Correct Answer
verified

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%.But, if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Correct Answer
verified

The unemployment rate in an economy is 7.5 percent.The total population of the economy is 250 million and the size of the civilian labour force is 180 million.The number of employed workers in this economy is:

Correct Answer
verified

If the nominal interest rate is 12 percent and the real interest rate is 8 percent, then the inflation premium is:

Correct Answer
verified

A statement that is often used to describe demand-pull inflation is:

Correct Answer
verified

Correct Answer
verified

Unanticipated inflation arbitrarily:

Correct Answer
verified

During a serious recession we would expect output to fall the most in:

Correct Answer
verified

Full-employment output is also called:

Correct Answer
verified

Real income can be determined by:

Correct Answer
verified

In an economy nominal GDP is $4,000 billion.The actual unemployment rate is 8 percent and the natural rate of unemployment is 6 percent.According to Okun's law there will be:

Correct Answer
verified

During 1993-1994, Democratic Republic of Congo has experienced an inflation rate of more than sixty-nine thousand percent per year.This economic condition would best be described as:

Correct Answer
verified

For every 1 percent that the actual unemployment rate exceeds the natural rate, there is generated a 2 percent GDP gap.This is a statement of:

Correct Answer
verified

Exam 9: Part B: Business Cycles, Unemployment, and Inflation

Which of the following statements is correct? Unanticipated inflation:

Correct AnswerverifiedShow Answer

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%.But, if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

Correct AnswerverifiedShow Answer

The unemployment rate in an economy is 7.5 percent.The total population of the economy is 250 million and the size of the civilian labour force is 180 million.The number of employed workers in this economy is:

Correct AnswerverifiedShow Answer

If the nominal interest rate is 12 percent and the real interest rate is 8 percent, then the inflation premium is:

Correct AnswerverifiedShow Answer

A statement that is often used to describe demand-pull inflation is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unanticipated inflation arbitrarily:

Correct AnswerverifiedShow Answer

During a serious recession we would expect output to fall the most in:

Correct AnswerverifiedShow Answer

Full-employment output is also called:

Correct AnswerverifiedShow Answer

Real income can be determined by:

Correct AnswerverifiedShow Answer

In an economy nominal GDP is $4,000 billion.The actual unemployment rate is 8 percent and the natural rate of unemployment is 6 percent.According to Okun's law there will be:

Correct AnswerverifiedShow Answer

During 1993-1994, Democratic Republic of Congo has experienced an inflation rate of more than sixty-nine thousand percent per year.This economic condition would best be described as:

Correct AnswerverifiedShow Answer

For every 1 percent that the actual unemployment rate exceeds the natural rate, there is generated a 2 percent GDP gap.This is a statement of:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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