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| 1 | |
If the price of airplane tickets increases by 10% while the prices of other goods and services are rising by 10 % on average, then the relative price of airplane tickets has: |
| | A) | increased 5%. |
| | B) | increased 10%. |
| | C) | decreased. |
| | D) | remained constant. |
| | E) | may have either increased or decreased. |
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| 2 | |
Making more frequent, but smaller cash withdrawals from banks _____ the inflation losses from holding cash and ____ the shoe leather costs of inflation. |
| | A) | increases; increases |
| | B) | increases; reduces |
| | C) | reduces; has no impact on |
| | D) | reduces; increases |
| | E) | reduces; reduces |
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| 3 | |
If the market interest rate is 9% and the inflation rate is 3%, then the real interest rate equals: |
| | A) | 3% |
| | B) | 6% |
| | C) | 9% |
| | D) | 12% |
| | E) | 27% |
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| 4 | |
The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 1999, the base year, the typical consumer purchased 5 books for $20 each and 30 hamburgers for $1 each. In 2000, the typical consumer purchased 8 books for $22 each and 36 hamburgers for $1.50 each. The consumer price for 2000 on Planet Econ equals: |
| | A) | 1.00 |
| | B) | 1.08 |
| | C) | 1.15 |
| | D) | 1.19 |
| | E) | 1.77 |
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| 5 | |
The CPI in year one equaled 1.45. The CPI in year two equaled 1.53. The rate of inflation between years one and two was _____ percent. |
| | A) | 4.0 |
| | B) | 4.5 |
| | C) | 5.3 |
| | D) | 5.5 |
| | E) | 8.0 |
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| 6 | |
All of the following are real quantities EXCEPT the: |
| | A) | number of new cars produced in one year. |
| | B) | tons of steel shipped to South America. |
| | C) | millions of computer chips shipped to computer makers. |
| | D) | billions of dollars invested in stocks. |
| | E) | truckloads of oranges used to manufacture juice. |
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| 7 | |
A college graduate in 1972 found a job paying $10,000. The CPI was 0.418 in 1972. A college graduate in 2000 found a job paying $30,000. The CPI was 1.68 in 2000. The 1972 graduate's job paid ____ in nominal terms and ______ in real terms than the 2000 graduate's job. |
| | A) | more; less |
| | B) | more; more |
| | C) | less; the same |
| | D) | less, more |
| | E) | less, less |
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| 8 | |
The CPI equals 1.00 in year one and 1.20 in year two. If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI , what will be the nominal wage in year two? |
| | A) | $12.50 |
| | B) | $15.00 |
| | C) | $15.20 |
| | D) | $17.25 |
| | E) | $18.00 |
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| 9 | |
If the CPI equals 1.55 in year 1 and 1.45 in year 2, then the rate of inflation between year 1 and year 2 equals: |
| | A) | 6.5% |
| | B) | 6.9% |
| | C) | -6.5% |
| | D) | -6.9% |
| | E) | -10.0% |
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| 10 | |
The Fisher effect is the tendency for _____ interest rates to be high when the inflation rate is ____. |
| | A) | real; high |
| | B) | real; low |
| | C) | nominal; high |
| | D) | nominal; low |
| | E) | nominal; steady |
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