29–99
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. rise as fast as the price index.
AACSB: Knowledge Application
A c c essibi 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: II
Top ic:
Redistribution Effects of Inflation
250.
The percentage change in one‘s real income can be approximated by
251.
Unanticipated inflation arbitrarily
252.
Unanticipated inflation tends to penalize
29-100
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
businesses which borrow money from financial institutions.
D.
governments that have a progressive personal income tax.
AACSB: Knowledge Application
A c c essibi 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: II
Top ic:
Redistribution Effects of Inflation
253.
Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If
unanticipated inflation occurs in the economy, then
254.
When unanticipated deflation occurs,
255.
Which of the following groups has traditionally benefited from unanticipated inflation?
29-101
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A.
consumers
B.
business firms
C. the Federal Government
D. the foreign sector
AACSB: Knowledge Application
A c c essibi 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: II
Top ic:
Redistribution Effects of Inflation
256.
A worker would be hurt least by inflation when the
257.
Which statement about inflation is correct?
29-102
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:
Redistribution Effects of Inflation
258.
In what circumstances would lenders most benefit?
259.
You are given the following information about the economy: the nominal interest rate = 8
percent, and the real rate of interest = 6 percent. The inflation
premium is
260.
With no inflation, a bank would be willing to lend a business firm $5 million at an annual
interest rate of 6 percent. But if the rate of inflation was
anticipated to be 4 percent, the bank
would most likely charge the firm an annual interest rate of
29-103
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c essibi 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: II
Top ic:
Redistribution Effects of Inflation
261.
If the inflation premium is 3 percent and the real interest on a loan is 4 percent, then the
nominal interest rate is
262.
Which of the following statements is correct?
263.
In the aftermath of the Great Recession, several governments engineered a negative nominal
interest rate. Using the formula that relates nominal interest
and real interest, negative nominal
rates could imply any of the following, except
29-104
264.
Having negative real interest rates could stimulate the economy if, in response,
265.
Regarding the overall effect of negative interest rates on the economy, economists
29-105
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Top ic:
Redistribution Effects of Inflation
266.
When a recession begins and unemployment begins to rise, the demand for goods and
services will fall. If the decline in demand is precipitous, which of
the following will occur?
267.
Which of the following statements about deflation is true?
268.
A cumulative wage-price spiral that produces very rapid inflation is called
29-106
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c essibi 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: II
Top ic:
Does Inflation Affect Output?
269.
In the 1920s, Germany after the First World War experienced an economic condition that
can be best described as
270.
Cross-country studies that bolster the “zero inflation” view indicate that lower rates of
inflation are associated with
271.
What are the primary effects of cost-push inflation?
29-107
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. It raises real output and redistributes an increased level of real income.
B. It reduces real output and redistributes a decreased level of real income.
C.
It raises real output but redistributes a decreased level of real income.
D.
It reduces real output but redistributes an increased level of real income.
AACSB: Knowledge Application
A c c essibi 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: II
Top ic:
Does Inflation Affect Output?
272.
With mild demand–pull inflation, the economy’s output level would tend to be
273.
What is the main problem with mild inflation, according to some economists?
29-108
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Top ic:
Does Inflation Affect Output?
274.
What is an advantage of mild inflation according to some economists?
275.
After the Great Recession of 2007–09 ended, real GDP increased
276.
Which of the following statements about employment growth soon after the Great Recession
29-109
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 essibi l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 29-02 Illustrate how unemployment is measured and explain the
different types of unemployment.
Test Bank: II
Top ic:
Unemployment
True / False Questions
277.
A recession is defined as a situation where the average price level in the economy is
increasing.
278.
The duration of a recession measures the depth of decline in real output during the
recession.
279.
If the total population is 175 million, the labor force is 100 million, and 89 million workers
are employed, then the unemployment rate is 11 percent.
29-110
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A c c essibi l i t y :
Keyboard Navigation
Blooms: Understand
Difficulty:
02 Medium
Learning Objective: 29-02 Illustrate how unemployment is measured and explain the
different types of unemployment.
Test Bank: II
Top ic:
Unemployment
280.
Anyone who is not employed is classified as unemployed in the Bureau of Labor Statistics
data on the labor force.
281.
Unemployment that is the result of deregulation, corporate downsizing, and the closure of
military bases is best categorized as frictional unemployment.
282.
Official unemployment statistics overstate unemployment because discouraged workers
who are not actively seeking work are counted as unemployed.
29-111
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: II
Top ic:
Unemployment
283.
If the economy‘s actual GDP is greater than its potential GDP, then there is high
unemployment in that economy.
284.
The unemployment rate among teenagers tends to be lower than the unemployment rate
among adults.
285.
If the CPI rises from 125 to 140 from one year to the next, then the rate of inflation is 15
percent.
29-112
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
push inflation and demand-pull inflation.
Test Bank: II
Top ic:
Inflation
286.
Inflation means that the prices of all items in the economy are increasing.
287.
When there is demand-pull inflation, people’s total spending in the economy will be falling.
288.
The percentage change in real income can be approximated by subtracting the percentage
change in the price level from the percentage change in nominal
income.
289.
Unanticipated inflation benefits creditors and savers.
290.
Lenders will be willing to reduce the nominal interest rates on loans if the expected
inflation increases.
291.
Deflation is when the inflation rate turns negative.
292.
Deflation is generally considered by economists to be a positive economic situation because
it creates strong job growth.
29-114
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: 29-04 Relate how unanticipated inflation can redistribute real income.
Test Bank: II
Top ic:
Redistribution Effects of Inflation
293.
In response to slow recoveries after the Great Recession, several governments made the
nominal interest rates in their nations turn negative with the
intent of stimulating their
economies.
294.
Cost-push inflation increases real output and employment.
295.
Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the
economy‘s real output.
29-115
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:
Does Inflation Affect Output?
296.
Economists who are willing to accept mild inflation consider it to be a necessary by–
product of high and growing spending that produces high levels of
output, full employment, and
economic growth.
297.
Demand–pull inflation is usually accompanied by low unemployment and higher real output.