Homework Sourse1Over the past 50 years consumer price index and inflation r
1.Over the past 50 years, consumer price index and inflation rate trends have been characterized by:
a consumer price index that has continuously decreased and an inflation rate that has been up and down.
a consumer price index that has continuously decreased and an inflation rate that has consistently increased.
a consumer price index that has continuously increased and an inflation rate that has been up and down.
a consumer price index that has been up and down and an inflation rate that has continuously decreased.
2.If wages and prices fall in the economy, then:
the real wage falls.
real incomes are not affected if all wages and prices fall uniformly.
purchasing power falls.
workers become poorer.
3.During times of very high inflation firms are forced to change prices more often than they would if the price levels were more stable, thus incurring costs that are passed along to the consumer. This is referred to as:
shoe-leather costs.
unit-of-account costs.
real wage costs.
menu costs.
4.Ben is scheduled to meet with his boss for his annual performance review. Under what circumstances will Ben be better off financially?
He receives a 3% pay raise and the inflation rate is 2%.
He receives a 3% pay raise and the inflation rate is 3%.
He receives a 4% pay raise and the inflation rate is 5%.
He receives no pay raise but the inflation rate is also zero.
5. The table illustrates the price level for an imaginary economy for the years 2009, 2010, and 2011. Calculate the inflation rate for 2011.
Year
Price Level
2009
95
2010
100
2011
110
10
9
5.3
13.6
6. Consider the information in the table. What is the inflation rate between the years 2010 and 2011?
Year
Cost
2008
98
2009
102
2010
104
2011
110
5.4
5.8
0.5
-5.6
7.Since 1940, the CPI has risen ________, but the annual percentage increases in recent years have been much ________ than those of the 1970s and early 1980s.
steadily; smaller
steadily; larger
sporadically; larger
sporadically; smaller
8.Price indexes measure:
changes in the unemployment rate.
fluctuations in aggregate output.
Fluctuations in the aggregate price level.
changes in consumption patterns.
9.Which statement is true regarding the three major indices (CPI, PPI and GDP deflator)?
They do not always move together and sometimes contradict each other.
They generally revealed a slowing down of inflation during the 1970s.
They indicated that prices remained unstable through the 1990s.
They all are considered measurements of inflation.
| 5. The table illustrates the price level for an imaginary economy for the years 2009, 2010, and 2011. Calculate the inflation rate for 2011.
|
Solution
1. Over the past 50 years, consumer price index has increased continuously and inflation rate has been UP and DOWN. OPTION C
2. Real income = wages / prices
IF wages and prices fall, then real incomes are not affected if wages and prices fall uniformly. OPTION B
