DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
180. Economists feel that taxing nominal capital gains imposes costs on the economy due to
a.
increased consumption.
b.
reduced consumption.
c.
increased investment.
d.
reduced investment.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
181. Some economists believe that technological progress could be increased if the federal government
a.
nationalized research facilities.
b.
levied taxes on nominal capital gains.
c.
levied taxes on real capital gains.
d.
levied taxes on gross rather than net investment.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
182. Sharon buys some common stock in 1990 for $10,000 and sells it in 2000 for $15,000. During the same period,
prices have risen by 75 percent. The net result of Sharon’s stock purchases is that she will
a.
pay no taxes because she earned negative real capital gains.
b.
lose purchasing power and have to pay taxes anyway.
c.
earn a real capital gain of $5,000 plus 75 percent.
d.
earn a real capital gain of $15,000 minus 75 percent.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPRPOG: Analysis
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
183. When nominal interest rates are held below inflation rates, then households will have an incentive to
a.
consume.
b.
save.
c.
purchase financial assets.
d.
postpone current consumption plans.
a
Moderate
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
184. Saving is often discouraged by usury laws during inflationary periods because
a.
b.
c.
d.
Moderate
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
185. During periods of high inflation, such as the 1979-1980 period, the existence of usury laws may cause
a.
nominal rates of interest to be above real rates.
b.
negative nominal rates of interest.
c.
negative real rates of interest.
d.
real rates of interest to be above nominal rates.
c
Moderate
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Reflective Thinking – BPROG: Analysis
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
186. The distinction between real and nominal rates of interest is understood by
a.
most public policy makers.
b.
the majority of the American population.
c.
a majority of legislators.
d.
relatively few Americans.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
Inflation Distorts Measurements
187. As inflation rates increase, borrowing and lending contracts tend to
a.
increase in size.
b.
decrease in size.
c.
decrease in length of time.
d.
increase in length of time.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPRPOG: Analysis
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
188. As inflation rates increase, shoppers will be forced to
a.
shop more at a particular store.
b.
spend less time comparing prices.
c.
spend less time visiting other stores.
d.
spend more time comparing prices.
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Inflation Distorts Measurements
189. When comparing the costs of inflation to society, it is important to distinguish between
a.
low versus high rates of inflation.
b.
expected versus unexpected inflation.
c.
high price levels and low price levels.
d.
real versus nominal inflation.
Moderate
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
The Costs of Low Versus High Inflation
190. Which of the following would impose the greatest costs to society?
a.
high levels of expected inflation
b.
low levels of expected inflation
c.
variable rates of inflation
d.
stable rates of inflation
c
Moderate
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPRPOG: Analysis
Markets, market failure, and ext – Markets, market failure, and externalities
191. One of the distinguishing differences between periods of low inflation and periods of high inflation is that
a.
low inflation periods are short-lived.
b.
high inflation periods are short-lived.
c.
high inflation periods are long-lived.
d.
low inflation leads to high inflation.
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Costs of Low Versus High Inflation
192. Which country most recently experienced hyperinflation?
a.
Germany
b.
Zimbabwe
c.
Chile
d.
all of the above
Easy
DISC: Measuring the Economy
United States – BPROG: Analytic
Measuring the Economy
The Costs of Low Versus High Inflation
193. The German inflation rate after World War I was measured in the thousands of percents. This condition is referred to
as
a.
fundamental inflation.
b.
environmental inflation.
c.
hyperinflation.
d.
episodic inflation.
c
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Costs of Low Versus High Inflation
194. From 1991 to 2007, the rate of inflation in the U.S. has been
a.
zero.
b.
between zero and 2.1%.
c.
between 1.6% and 4.1%.
d.
between 3.2% and 7.2%.
c
Easy
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
The Costs of Low Versus High Inflation
195. The main cost that low inflation imposes on an economy is that low inflation
a.
inevitably leads to high inflation.
b.
distorts some economic decisions.
c.
reduces real wages.
d.
benefits lenders at the expense of borrowers.
Moderate
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
The Costs of Low Versus High Inflation
196. Hyperinflations are usually made possible by
a.
multinational corporations.
b.
highly mobile international capital.
c.
governments printing money rapidly.
d.
higher and higher tax rates.
c
Moderate
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
197. Which of the following countries has not experienced hyperinflation in the twentieth century?
a.
Germany
b.
Russia
c.
Argentina
d.
United States
Easy
DISC: Measuring the Economy
United States – BPROG: Analytic
Measuring the Economy
The Costs of Low Versus High Inflation
198. When governments rapidly increase the supply of money, the usual result is
a.
deflation.
b.
low inflation.
c.
hyperinflation.
d.
increasing long-term investment.
c
Moderate
DISC: The role of government
United States – BPROG: Analytic
The role of government
The Costs of Low Versus High Inflation
199. “Hidden” or “disguised” unemployment consists of:
a.
involuntary part time work
b.
loss of overtime
c.
shortened work hours
d.
All of the above.
e.
b and c only
Moderate
DISC: Labor markets
United States – BPROG: Analytic
Labor markets
Counting the Unemployed: The Official Statistics
200. Jorge, a computer programmer, was laid off when his firm went out of business. He began to look for work, but was
struck by a car and his hands and one leg were broken. He is unable to use the computer to seek jobs, or to go to
interviews for jobs. It is now week 5 of 6 weeks in his cast. According to the current rules, Jorge will probably be
classified as:
a.
employed
b.
unemployed
c.
out of the labor force
d.
unemployable
c
DISC: Labor markets
United States – BPROG: Reflective Thinking – BPROG: Analysis
Labor markets
Counting the Unemployed: The Official Statistics
Essay
201. Why do environmentalists worry about faster economic growth? Economists concede that faster growth is not always
better. Why?
202. Are there key differences between an increase in the capital stock and an improvement in the level of technology?
203. Describe how the labor force, the nation’s capital stock, and the rate of technical progress contribute to potential GDP
growth and labor productivity.
204. High unemployment is socially wasteful. Why?
Easy
DISC: Productivity and growth
United States – BPROG: Analytic
Productivity and growth
The Goal of Low Inflation
205. Define the following terms carefully:
(a)
Full employment
(b)
Purchasing power of money
(c)
Real wage rate
(d)
Relative price
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
The Goal of Low Unemployment
206. Distinguish between real rate of interest and nominal rate of interest.
Easy
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
207. During the course of the twentieth century, the average workweek in the United States has gotten shorter and
Americans have enjoyed greater amounts of leisure time. How has this development affected potential GDP and labor
productivity?
208. How is the unemployment rate calculated? Describe the three principal types of unemployment.
209. Does the existence of unemployment insurance eliminate the economic costs of unemployment?
210. Explain how the current U.S. tax system levies taxes on capital gains and earned interest. What does this mean for
the costs of inflation?
211. Does inflation always cause workers losses due to decreases in real wages? Why or why not?
212. What is a GDP deflator? Why do some economists consider the GDP deflator to be a better measure of overall
inflation than the Consumer Price Index?