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29-41
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Difficulty:
02 Medium
Learning Objective: 29-04 Relate how unanticipated inflation can redistribute real income.
Test Bank: I
Topi c :
Redistribution Effects of Inflation
104.
Suppose that a person's nominal income rises by 5 percent and the price level rises from
125 to 130. The person's real income will
105.
In 2010, Tatum's nominal income rose by 4.6 percent and the price level rose by 1.6
percent. We can conclude that Tatum's real income
106.
In which of the following cases would real income rise?
29-42
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 29-04 Relate how unanticipated inflation can redistribute real income.
Test Bank: I
Topi c :
Redistribution Effects of Inflation
107.
Under which of the following circumstances would we observe the greatest increase in real
income?
108.
Cost-push inflation
109.
Cost-of-living adjustment clauses (COLAs)
29-43
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
increase the gap between nominal and real income.
D. tie wage increases to changes in the price level.
110.
During a period of hyperinflation,
111.
Inflation is undesirable because it
112.
Who is least likely to be hurt by unanticipated inflation?
113.
A lender need not be penalized by inflation if the
114.
Unanticipated inflation
29-45
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
output.
Test Bank: I
Topi c :
Does Inflation Affect Output?
115.
Inflation affects
116.
If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the
inflation premium is
117.
If both the real interest rate and the nominal interest rate are 3 percent, then the
29-46
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 29-05 Discuss how inflation may affect the economys level of real
output.
Test Bank: I
Topi c :
Does Inflation Affect Output?
118.
Suppose the nominal annual interest rate on a two-year loan is 8 percent and lenders expect
inflation to be 5 percent in each of the two years. The annual real rate of interest is
119.
Suppose that lenders want to receive a real rate of interest of 5 percent and that they expect
inflation to remain steady at 2 percent in the coming years.
Based on this, lenders should charge
a nominal interest rate of
120.
If the real interest rate and the nominal interest rate are both negative and equal to each
other, then the
121.
Governments imposing negative nominal interest rates are attempting to
122.
(Consider This) Which of the following best explains why unemployment rises significantly
during a recession?
29-48
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Difficulty:
02 Medium
Learning Objective: 29-02 Illustrate how unemployment is measured and explain the
different types of unemployment.
Test Bank: I
Topi c :
Unemployment
123.
(Consider This) If wages were more downwardly flexible, then we would expect
124.
(Consider This) The feudal practice of clipping coins illustrates the idea of
125.
(Consider This) The main point of the Consider This box on clipping coins is that
126.
(Consider This) Deflation is most likely to occur
127.
(Consider This) Which of the following statements is most accurate about economists’
concerns about deflation?
29-50
128.
(Last Word) Which of the following statements best represents economists’ predictions
about recovery from the Great Recession?
129.
(Last Word) Which of the following statements best describes employment changes since the
Great Recession?
130.
(Last Word) Which of the following statements is true about employment during the Great
Recession?
29-51
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. The number of jobs held by people 55 or older increased.
131.
(Last Word) Growth in employment since the Great Recession
True / False Questions
132.
The production of durable goods is more stable than the production of nondurables over the
business cycle.
133.
The business cycle is so named because upswings and downswings in business activity are
predictably equal in terms of duration and intensity.
134.
People who work part time, but desire to work full time, are considered to be officially
unemployed.
135.
The natural rate of unemployment in the United States today is about 5 to 6 percent.
136.
An annual rate of inflation of 7 percent will double the price level in about 15 years.
137.
During the past 10 years, the annual rate of inflation in the United States has averaged less
than 1 percent.
138.
If the price level doubled in a 23-year period, we can conclude that the average annual rate
of inflation over that period was about 3 percent.
139.
Unanticipated inflation benefits debtors at the expense of creditors.
29-54
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 29-05 Discuss how inflation may affect the economys level of real
output.
Test Bank: I
Topi c :
Does Inflation Affect Output?
140.
Unanticipated inflation helps some groups in the economy.
141.
If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the
inflation premium is 13 percent.
142.
To prompt recovery from the Great Recession, some nations forced their nominal interest
rates to be negative.
29-55
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
output.
Test Bank: I
Topi c :
Does Inflation Affect Output?
143.
A concern about negative nominal interest rates is that they will encourage more saving by
people trying to compensate for the negative return on their
money saved.
Multiple Choice Questions
144.
The recurrent ups and downs in the level of economic activity extending over several years
are referred to as
145.
The diagram illustrates the pattern of
29-57
146.
In the accompanying diagram, the phases of the business cycle from points A to D are
147.
In the accompanying diagram, the straight line E drawn through the wavy lines would provide an
estimate of the
148.
Which phase of the business cycle would be most closely associated with an economic
contraction?
29-59
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Top ic:
The Business Cycle
149.
A peak in the business cycle
150.
A trough in the business cycle occurs when
151.
In the expansion phase of a business cycle,
29-60
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 29-01 Describe the business cycle and its primary phases.
Test Bank: II
Top ic:
The Business Cycle
152.
A recession is a decline in
153.
What has been the range of the decline in real output during recessions in the U.S. between
1950 and 2009?
154.
What has been the range for the duration in months of U.S. recessions between 1950 and
2009?
