Inflation Measurement and Adjustment Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. Which one of these scenarios would cause Cost-Push Inflation?

Question 2 2. If the nominal GDP is $5 trillion in year 1, and the real GDP is $4.5 trillion, what is the GDP deflator?

Question 3 3. What is the real interest rate when the nominal interest rate on a bank checking account is 1%, and the rate of inflation is 2%?

Question 4 4.

Susie lives in Arkansas and she is in the market for a new car just released by XYZ Car Company. Susie is finding out that the car is in very high demand, and she has seen the price on the car rise twice since she started shopping around. Alan lives in California and he is in the market for the new tablet released by ABC Electronics. Alan is finding out the tablet is hard to get a hold of because it is in such high demand, and the price keeps rising on the tablet at all the retailers Alan is visiting. Rachel lives in New York and she is the market for new leather jacket put out by her favorite clothing line. Rachel is realizing that this is the case for many in New York and so the cost keeps increasing for this leather jacket she wants.

What is the above scenario an example of?

Question 5 5. How do economists illustrate stagflation?

Page 2

Question 6 6. In year one, nominal GDP is $5,000, while real GDP is $4,500. In year two, nominal GDP is $5,500, while real GDP is $4,800. Which of the following statements is TRUE?

Question 7 7. What occurs when the rate of unemployment goes up at the same time as inflation?

Question 8 8. Why do economists use real GDP?

Question 9 9. If the Consumer Price Index rises from 101 to 104, which of the following statements is true?

Question 10 10. A retired woman lives entirely on Social Security income, while a farmer borrows money to buy a new tractor. How would inflation affect them?

Page 3

Question 11 11. What is the benefit of using Real GDP?

Question 12 12. What is the formula needed to calculate real GDP growth rate?

Question 13 13. What is the major drawback of using nominal GDP to measure the economic output of a nation?

Question 14 14. The Substitution Bias is which of the following?

Question 15 15. Which of the following groups of people will benefit from unexpected inflation?

Page 4

Question 16 16. In year one, a worker's nominal wage is $25,000, and the CPI is 100. The following year, the worker's nominal wages stay the same, but the CPI is 105. In order to calculate the worker's real wage in year two, what needs to be done?

Question 17 17. How is a person's likelihood to save related to the simple spending multiplier?

Question 18 18. Which of the following would be negatively affected from unanticipated inflation?

Question 19 19. What does the GDP deflator represent?

Question 20 20. If nominal GDP increased by 5.1% and real GDP increased by 2.5% last year, which of the following is TRUE?

Page 5

Question 21 21. Which of the following is a cause of Cost-Push Inflation?

Question 22 22. Assume that the marginal propensity to consume is 0.9. What is the maximum amount that real GDP could change if government expenditures increase by $1 billion?

Question 23 23. How is real GDP calculated?

Question 24 24. Demand-Pull Inflation is illustrated by which of the following?

Question 25 25. What are the two reasons that economic output can increase?

Page 6

Question 26 26. What happens when actual inflation is higher than expected inflation?

Question 27 27. The Consumer Price Index (CPI) is based on a fixed basket of goods that the average citizen buys. The Substitution Bias causes this index to do which of the following?

Question 28 28. What is the nominal gross domestic product?

Question 29 29. Which of the following is considered the best measure of changes in prices by economists?

Question 30 30. Melissa has a choice between two jobs. The first is a job is in New York City with a salary of $90,000. The other job has a salary of $80,000 per year salary in Boise, Idaho. Let's assume that the CPI is 120 in New York, while the CPI is 100 in Boise. If Melissa wants to maximize her 'real wage', which job should she choose?

Inflation Measurement and Adjustment Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Economics 102: Macroeconomics  /  Business Courses
Support