Chapter 22 Inflation

*Ch22 Inflation*

*Multiple Choice Questions*

*1. *__________ implies that pressure for price increases reaches across _______________markets, not just one.

A. inflation; all
B. deflation; most
C. inflation; most
D. deflation; all

Answer: C Reference:

Explanation:

Type: Multiple Choice

*2. *While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.

A. ongoing decrease
B. ongoing rise
C. short term rise
D. short term decrease

Answer: B Reference:

Explanation:

Type: Multiple Choice

*3. *The effects of inflation are seen in:

A. goods and services only
B. wages and income levels only
C. services and wages only
D. goods, services, wages and income levels

Answer: D Reference:

Explanation:

Type: Multiple Choice

*4. *Inflation implies that the level of all prices _____________________.

A. decrease
B. stay the same
C. increase
D. none of the above

Answer: C Reference:

Explanation:

Type: Multiple Choice

*5. *When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders’ gym membership?

A. 8.6%
B. 5.4%
C. 7.87%
D. 16.66%

Answer: D Reference:

Explanation:

Type: Multiple Choice

*6. *Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.

A. all goods
B. the basket of goods
C. all goods and services
D. all services

Answer: B Reference:

Explanation:

Type: Multiple Choice

*7. *If the price index moves from 107 to 110, the rate of inflation is:

A. 3%
B. 30%
C. 28%
D. 2.8%

Answer: D Reference:

Explanation:

Type: Multiple Choice

*8. *The most commonly cited measure of inflation in the United States is:

A. the Consumer Price Index (CPI).
B. the Deflationary Price Index (DPI)
C. the Cumulative Price Index (CPI)
D. the Inflationary Price Index (IPI)

Answer: A Reference:

Explanation:

Type: Multiple Choice

*9. *One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer’s true cost of living, is:

A. substitution bias
B. attribution bias
C. complimentary bias
D. preference bias

Answer: A Reference:

Explanation:

Type: Multiple Choice

*10. *The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.

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