Econ Chapter 22

__________ implies that pressure for price increases reaches across _______________markets, not just one.

A. inflation; all
B. deflation; most
C. inflation; most
D. deflation; all

C

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.

A. ongoing decrease
B. ongoing rise
C. short term rise
D. short term decrease

C

The effects of inflation are seen in:

A. goods and services only
B. wages and income levels only
C. services and wages only
D. goods, services, wages and income levels

D

Inflation implies that the level of all prices _____________________.

A. decrease
B. stay the same
C. increase
D. none of the above

C

When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership?

A. 8.6%
B. 5.4%
C. 7.87%
D. 16.66%

D

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.

A. all goods
B. the basket of goods
C. all goods and services
D. all services

B

If the price index moves from 107 to 110, the rate of inflation is:

A. 3%
B. 30%
C. 28%
D. 2.8%

D

The most commonly cited measure of inflation in the United States is:

A. the Consumer Price Index (CPI).
B. the Deflationary Price Index (DPI)
C. the Cumulative Price Index (CPI)
D. the Inflationary Price Index (IPI)

A

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:

A. substitution bias
B. attribution bias
C. complimentary bias
D. preference bias

A

The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.

A. inflation rate
B. price index rate
C. consumer price index
D. producer price Index

A

The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.

A. 200; 800
B. 80,000; 400
C. 80,000; 200
D. 800; 200

C

Two factors that complicate the calculation of the inflation rate are:

A. substitution and quality/new product bias
B. preferential bias
C. complimentary product bias
D. consumer behavior bias

A

When we want to measure wage inflation in the labor market, we use the:

A. Consumer Price Index
B. Product Price Index
C. Employment Cost Index
D. Employment Price Index

C

The Producer Price Index is based on prices paid for supplies and inputs by:

A. consumers
B. producers of goods and services
C. government
D. the small business sector

B

The ____________________ is based on the prices of merchandise that are exported or imported.

A. International Product Index
B. Producer Price Index
C. Foreign Price Index
D. International Price Index

A

Another term used to describe negative inflation is:

A. counter inflation
B. deflation
C. hyperinflation
D. GDP deflator

B

In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________.

A. perpetual inflation
B. ultra inflation
C. hypo inflation
D. hyperinflation

D

Which of the following is an example of one of the major categories in the overall CPI?

A. apparel and accessories
B. entertainment
C. recreation
D. transportation and insurance

C

The situation where the buying power of money in terms of goods and services increases is called:

A. deflation.
B. inflation.
C. stationary pricing.
D. hyperinflation.

A

Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?

A. Producer Price Index
B. Consumer Price Index
C. Employment Cost Index
D. Processing Price Index

A

What name is given to the index based on the prices of exported or imported merchandise?

A. U.S. Producer Trade Index
B. International Trade Index
C. International Price Index
D. U.S. Producer Price Index

C

An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

A. Consumer Price Index
B. GDP Price Index
C. Consumer GDP
D. GDP Deflator

D

The GDP deflator is a price index that includes the following components of GDP:

A. Consumption
B. Consumption plus Investment but not Exports
C. Consumption, Investment plus Exports minus Imports
D. Consumption, Investment, Government plus Exports minus Imports

D

With regard to the economy, the term negative inflation is synonymous with which of the following?

A. recession
B. depression
C. deflation
D. hyperinflation

C

An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?

A. 18.34%
B. 38.58%
C. 151.48%
D. 70.61%

A

Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?

A. $430 billion
B. $835 billion
C. $2,063 billion
D. $2,449 billion

D

What distinguishes the real value of a statistic from the nominal value of a statistic?

A. timing of announcement
B. adjusting for inflation
C. adjusting for GDP deflator
D. real interest rate

B

Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?

A. COLA plus 1.6%
B. COLA plus 1.9%
C. COLA plus 2.4%
D. COLA plus 2.2%

C

When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.

A. indexed
B. COLAed
C. nominally adjusted
D. semi-indexed

A

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.

A. cost of living adjustments
B. inflation protection plans
C. inflation ceiling guarantees
D. wage protection clauses

A

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.

A. stabilize
B. understate
C. overstate
D. reduce

C

The __________________ is the nominal interest rate minus the rate of inflation.

A. real GDP
B. real interest rate
C. nominally adjusted
D. annualized interest rate

B

A payment is said to be ________________ if it is automatically adjusted for inflation.

A. cross referenced
B. indexed
C. matched
D. maintained

B

A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned.

A. risk premium
B. inflation
C. compound interest
D. opportunity costs

B

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Econ Chapter 22

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__________ implies that pressure for price increases reaches across _______________markets, not just one.

A. inflation; all
B. deflation; most
C. inflation; most
D. deflation; all

C

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.

A. ongoing decrease
B. ongoing rise
C. short term rise
D. short term decrease

C

The effects of inflation are seen in:

A. goods and services only
B. wages and income levels only
C. services and wages only
D. goods, services, wages and income levels

D

Inflation implies that the level of all prices _____________________.

A. decrease
B. stay the same
C. increase
D. none of the above

C

When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders’ gym membership?

A. 8.6%
B. 5.4%
C. 7.87%
D. 16.66%

D

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.

A. all goods
B. the basket of goods
C. all goods and services
D. all services

B

If the price index moves from 107 to 110, the rate of inflation is:

A. 3%
B. 30%
C. 28%
D. 2.8%

D

The most commonly cited measure of inflation in the United States is:

A. the Consumer Price Index (CPI).
B. the Deflationary Price Index (DPI)
C. the Cumulative Price Index (CPI)
D. the Inflationary Price Index (IPI)

A

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer’s true cost of living, is:

A. substitution bias
B. attribution bias
C. complimentary bias
D. preference bias

A

The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.

A. inflation rate
B. price index rate
C. consumer price index
D. producer price Index

A

The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.

A. 200; 800
B. 80,000; 400
C. 80,000; 200
D. 800; 200

C

Two factors that complicate the calculation of the inflation rate are:

A. substitution and quality/new product bias
B. preferential bias
C. complimentary product bias
D. consumer behavior bias

A

When we want to measure wage inflation in the labor market, we use the:

A. Consumer Price Index
B. Product Price Index
C. Employment Cost Index
D. Employment Price Index

C

The Producer Price Index is based on prices paid for supplies and inputs by:

A. consumers
B. producers of goods and services
C. government
D. the small business sector

B

The ____________________ is based on the prices of merchandise that are exported or imported.

A. International Product Index
B. Producer Price Index
C. Foreign Price Index
D. International Price Index

A

Another term used to describe negative inflation is:

A. counter inflation
B. deflation
C. hyperinflation
D. GDP deflator

B

In the early 1990’s extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________.

A. perpetual inflation
B. ultra inflation
C. hypo inflation
D. hyperinflation

D

Which of the following is an example of one of the major categories in the overall CPI?

A. apparel and accessories
B. entertainment
C. recreation
D. transportation and insurance

C

The situation where the buying power of money in terms of goods and services increases is called:

A. deflation.
B. inflation.
C. stationary pricing.
D. hyperinflation.

A

Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?

A. Producer Price Index
B. Consumer Price Index
C. Employment Cost Index
D. Processing Price Index

A

What name is given to the index based on the prices of exported or imported merchandise?

A. U.S. Producer Trade Index
B. International Trade Index
C. International Price Index
D. U.S. Producer Price Index

C

An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

A. Consumer Price Index
B. GDP Price Index
C. Consumer GDP
D. GDP Deflator

D

The GDP deflator is a price index that includes the following components of GDP:

A. Consumption
B. Consumption plus Investment but not Exports
C. Consumption, Investment plus Exports minus Imports
D. Consumption, Investment, Government plus Exports minus Imports

D

With regard to the economy, the term negative inflation is synonymous with which of the following?

A. recession
B. depression
C. deflation
D. hyperinflation

C

An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?

A. 18.34%
B. 38.58%
C. 151.48%
D. 70.61%

A

Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?

A. $430 billion
B. $835 billion
C. $2,063 billion
D. $2,449 billion

D

What distinguishes the real value of a statistic from the nominal value of a statistic?

A. timing of announcement
B. adjusting for inflation
C. adjusting for GDP deflator
D. real interest rate

B

Nancy’s union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy’s wage increase be expressed in the new contract?

A. COLA plus 1.6%
B. COLA plus 1.9%
C. COLA plus 2.4%
D. COLA plus 2.2%

C

When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.

A. indexed
B. COLAed
C. nominally adjusted
D. semi-indexed

A

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.

A. cost of living adjustments
B. inflation protection plans
C. inflation ceiling guarantees
D. wage protection clauses

A

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer’s true cost of living, because it doesn’t take into account that the person can substitute between goods according to changes in their relative prices.

A. stabilize
B. understate
C. overstate
D. reduce

C

The __________________ is the nominal interest rate minus the rate of inflation.

A. real GDP
B. real interest rate
C. nominally adjusted
D. annualized interest rate

B

A payment is said to be ________________ if it is automatically adjusted for inflation.

A. cross referenced
B. indexed
C. matched
D. maintained

B

A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned.

A. risk premium
B. inflation
C. compound interest
D. opportunity costs

B

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