CHAPTER 50
Inflation
MULTIPLE CHOICE
564. Inflation is defined as
a.
b. an increase in the level of GDP.
c. an increase in the price of an important good like gasoline.
d. an increase in the overall level of prices.
565. The annual rate of inflation is typically measured by
a. a percentage increase in the price of gasoline and other basic commodities.
b. the difference in the Consumer Price Index from one year to the next.
c. the percentage change in the Consumer Price Index.
d. the increase in the real GDP.
566. Which group of people is likely to be the most concerned about inflation?
a. individuals whose wages are indexed to the rate of inflation.
b. businesses selling goods that are relatively price inelastic.
c. Retirees on a fixed income.
d. Corporations with a significant degree of monopoly power.
567. Inflation that is driven by the rising cost of inputs including wages and salaries is called
a. demand-pull inflation.
b. cost push inflation
c. stagflation.
d. profit push inflation
568. During World War II, the government imposed legal controls on prices. As a result there
was
a. no inflation at all.
b. repressed inflation.
c. stagflation.
d. demand-pull inflation
569. The Keynesian explanation of inflation is that
a. it is caused by aggregate demand rising faster than aggregate supply.
b. it is caused by aggregate supply rising faster than aggregate demand.
c. it is caused by an expansion of the money supply.
d. it is caused by rising costs of production during a time of deficient aggregate demand.
570. A prominent conservative view of inflation is that
a. it is caused by high input costs, included high wages and salaries.
b. it is caused by a deficiency of aggregate demand.
c. it is caused by productivity rising faster than wages.
d. it is caused by excess aggregate demand.
571.
a. inflation accompanied by low unemployment.
b. inflation at a time of excess aggregate demand.
c. inflation accompanied by high unemployment.
d. inflation caused by an expansion of the money supply.
572. Keynesian theory predicts that inflation
a. will rise during expansions and rise during recessions.
b. will fall during expansions and rise during recessions.
c. will fall during expansions and fall during recessions.
d. will rise during expansions and fall during recessions.
573. The phenomenon of inflation during recessions
a. –
b. does not occur.
c. is –
d. is caused by wage and price controls.
APPENDIX 50.1
Market Power and Administered Prices
MULTIPLE CHOICE
574. What are administered prices?
a. prices that are determined by market forces.
b. prices that are determined by the government.
c. prices that are determined by corporations in the oligopoly sector.
d. prices that are different for large buyers than for individual consumers.
575. Gardiner Means examined the behavior of prices during the Great Depression and found
that
a. prices in the oligopoly sector declined much more than prices in the competitive sector.
b. prices in the oligopoly sector declined very little compared to prices in the competitive
sector.
c. prices in the oligopoly sector declined at about the same rate as prices in the competitive
sector.
d. prices in the oligopoly sector fell while prices in the competitive sector rose.
576. Gardiner Means examined the relationship between prices and output during the Great
Depression and found that
a. oligopoly industries maintained prices by greatly reducing output.
b. oligopoly industries lowered prices by increasing output.
c. oligopoly industries increased prices through sheer monopoly power.
d. oligopoly industries greatly reduced prices and managed to maintain production levels.
APPENDIX 50.2
Wage and Price Controls
MULTIPLE CHOICE
577. The US government implemented wage and price controls during World War II because
a. there was a significant increase in the production of consumer goods.
b. there was a significant reduction in the production of consumer goods.
c. there was a major increase in demand by government for consumer goods.
d. consumer goods manufacturers were worried about falling prices of consumer goods.
578. The only case of wage and price controls in the US during peacetime occurred
a. during the Kennedy-Johnson administration.
b. during the administration of William Clinton.
c. during the administration of President Nixon.
d. during the administration of President Galbraith.