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I am tutor with 1 year experience. Expert in chemistry and mathematics. Computer Science and Information Technology are by degree course subjects

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Science40Information Technology962Algebra3Biology948Mathematics529Economics588Chemistry1419
Answer: 1
Answer: a
Answer: A
Answer: c
Answer: C
Answer: d

Question 1

  1. The statement that "increases in the tax on gasoline increase the price of gasoline" is an example of a

    marginal statement.

    ceteris paribus statement.

    macroeconomic statement.

    normative statement.

    positive statement.

1 points

Question 2

  1. Which of the following is a normative statement?

    An increase in the supply of computers has caused computer prices to fall.

    Hurricanes strike mainly Florida and North Carolina.

    Recessions lead to increases in the unemployment rate.

    Flood victims should pay for their own rebuilding.

    When the price of kiwi fruit increases, fewer people eat kiwi fruit.

1 points

Question 3

  1. In the circular flow model, goods and services are bought and sold in the

    financial market.

    government market.

    monetary flows.

    resource/factor market.

    product market.

1 points

Question 4

  1. A statement that "All children should receive free health care" is an example of what kind of statement?

    a positive statement

    a natural experiment statement

    a fair statement

    a statement on the margin

    a normative statement

1 points

Question 5

  1. Scarcity

    applies only to people living in poverty.

    used to exist everywhere but has been eliminated in advanced economies.

    is the inability to satisfy all our wants.

    is not something that affects very rich people.

1 points

Question 6

  1. Which of the following statements is a positive statement?

    We need to spend less on luxury items for the wealthy, and more on necessities for the less fortunate.

    There should be a computer in every elementary school classroom.

    Too many people are unemployed.

    Our country needs to increase military spending.

    Online shopping increased by 50 percent this Christmas season.

1 points

Question 7

  1. The tools, skills, and equipment used to produce a good or service is called

    captial.

    labor.

    entrepreneural skills and ability.

    land or natural resources.

1 points

Question 8

  1. Scarcity requires that we

    make choices about what goods and services to produce.

    produce efficiently.

    learn to limit our wants.

    have the most rapid economic growth possible.

    have unlimited resources.

1 points

Question 9

  1. In the circular flow model, labor is bought and sold in the

    government market.

    product market.

    monetary flows.

    financial market.

    resource/factor market.

1 points

Question 10

  1. Which branch of economics studies the decisions of individual consumers and individual firms?

    marginal economics

    normative economics

    macroeconomics

    positive economics

    microeconomics

Answer: 2
Answer: A
Answer: A

Please don't answer if you are not sure 100% ! Thanks


1)Which of the following is a normative statement?
A) The deduction for state taxes cost the federal government $100 billion per year.
B) Taxpayers in North Carolina pay state taxes which are above the national average.
C) Twenty-two states use a lottery to raise state taxes.
D) Congress is considering the president's tax plan to increase taxes which is a fair plan.



2)Which of the following is the best example of a normative economic statement?
A) A rise in gasoline prices will cause gasoline purchases to fall.
B) The federal government should spend more on health care.
C) Raising the minimum wage will result in greater unemployment.
D) If more money is printed, then the economy's price level will rise.



3)On a production possibilities curve diagram, greater entrepreneurship:
A) causes the curve to shift outward.
B) keeps the economy on the curve.
C) prevents movement along the curve.
D) keeps the economy at the corners of the curve.



4)
A source of economic growth is:
A) unemployment.
B) inefficiency.
C) less resources.
D) greater entrepreneurship.



5)Which of the following will reduce the supply of motorcycles?
A) An increase in the population age 16 to 35, the primary consumers of motorcycles.
B) An increase in taxes imposed on motorcycle producers.
C) A technological improvement reducing the production costs of motorcycles.
D) A government study that reveals motorcycle riders, on average, live 10 years longer than those who don't ride motorcycles.



6)Market equilibrium is:
A) defined as the condition in which there is neither a shortage or surplus.
B) defined as the condition under which the separately formulated plans of buyers and sellers exactly mesh when tested in the market.
C) represented graphically by the intersection of the supply and demand curves.
D) all of these.






Answer: B

18. [Related to the Making Connection] The Making the Connection explains that there are both positive and normative elements to the debate over whether medical schools should charge tuition and whether hospitals should continue to pay residents who pursue primart care but not residents who specialize

Which of the following economic statistsics would be the most useful in evaluating the positive elements in this debate?

A. Poverty rates by geographic region.

B. Medical school tuition rates, applications, and enrollments.

C. Age distribution characterists of the population by geographic region

D. Physician incomes by specialty and geographic region.

E. All of the Above

Assuming that these statistics are available or could be gathered, are they likely to resolve the normative issues in this debate?

A. Yes, the quantative analysis of hard economic data leaves no unsettled questions. Subjective considerations cannot override objective analysis.

B. No, because normative issues involve value judgements that incorporate an individuals full range of experiences, beliefs, and emotions.

22. The economy of East Paragon has been experiencing deflation for the last few months, with prices of goods and services declining. Because firms are charging lower prices, they expected higher sales. However, consumption spending did not increase much, resulting in substantial losses for these firms.

Which of the following, if true, explains why consumers did not increase consumption in spite of falling prices?

A. Most people were expecting prices to decline further.

B. The rate of unemployment in thise country is lower that most other developing countries.

C. The interest rate offered on bank deposits is low.

D. The government lowered taxes on corporate profits earlier this year.

E. The government recently accounced plans to withdraw subsidies on petroleum products.

Answer: A

Statement 1: Raising the minimum wage will lead to a surplus of workers in the labor market. Statement 2: Rent controls lead to shortages in the housing market.
A) Statement (1) is a normative economic statement; statement (2) is a positive economic statement.
B) Both statements (1) and (2) are normative economic statements.
C) Both statements (1) and (2) are positive economic statements.
D) Statement (1) is a positive economic statement; statement (2) is a normative economic statement.

Not sure.

Which statement is TRUE about scarcity?
A) Scarcity is no longer an economic problem in the U.S. because it is a rich country.
B) None of the answers given is true of scarcity.
C) If we all had more money, there would be no scarcity.
D) The economic problem is limited to finding a solution for poverty.

Is it B?

Statement 1: Germany decides to tax U.S. wine coming into its country. As a result, German producers of wine are able to charge higher prices for their German-made wine. Statement 2: This tax is an example of a tariff.
A) Statement (1) is true; statement (2) is false.
B) Both statements (1) and (2) are true.
C) Both statements (1) and (2) are false.
D) Statement (1) is false; statement (2) is true.

Not sure.

Two countries can be better off by specializing and trading (say goods X and Y) with one another if:
A) One country has the comparative advantage in one good (say good X), while the other country has the comparative advantage in the other good (good Y).
B) Both countries have the comparative advantage in one good (say good X).
C) Both countries have the absolute advantage in producing one good (say good X).
D) One country has both the absolute and comparative advantage in one good (say good X), while the other country has both the absolute and comparative advantage in the other good (good Y).

Is it D?

Which of the following statements about a minimum wage is TRUE?
A) In order for the minimum wage to be effective, it must be set BELOW the equilibrium wage.
B) An effective minimum wage ensures that all people who are looking for work will be able to find work at jobs that pay a decent wage.
C) All of the answers given are true.
D) A higher minimum wage leads to a shortage of workers in the market.
E) An effective minimum wage acts as a price floor on the wage that businesses pay workers.

Is it C?

Answer: D

18. [Related to the Making Connection] The Making the Connection explains that there are both positive and normative elements to the debate over whether medical schools should charge tuition and whether hospitals should continue to pay residents who pursue primart care but not residents who specialize

Which of the following economic statistsics would be the most useful in evaluating the positive elements in this debate?

A. Poverty rates by geographic region.

B. Medical school tuition rates, applications, and enrollments.

C. Age distribution characterists of the population by geographic region

D. Physician incomes by specialty and geographic region.

E. All of the Above

Assuming that these statistics are available or could be gathered, are they likely to resolve the normative issues in this debate?

A. Yes, the quantative analysis of hard economic data leaves no unsettled questions. Subjective considerations cannot override objective analysis.

B. No, because normative issues involve value judgements that incorporate an individuals full range of experiences, beliefs, and emotions.

22. The economy of East Paragon has been experiencing deflation for the last few months, with prices of goods and services declining. Because firms are charging lower prices, they expected higher sales. However, consumption spending did not increase much, resulting in substantial losses for these firms.

Which of the following, if true, explains why consumers did not increase consumption in spite of falling prices?

A. Most people were expecting prices to decline further.

B. The rate of unemployment in thise country is lower that most other developing countries.

C. The interest rate offered on bank deposits is low.

D. The government lowered taxes on corporate profits earlier this year.

E. The government recently accounced plans to withdraw subsidies on petroleum products.

Answer: a
Answer: 2
Answer: 4
Answer: 4

Another name for economics can be the

art of banking.
study of striking it rich.
art of luck.
science of winning at gambling.
science of choices.

One way to distinguish positive from normative statements is to say that

positive statements are always true and normative statements are sometimes true.
normative statements can be proven to be true but positive statements can never be proven to be true.
positive statements deal with "what ought to be" while normative statements deal with "what is."
positive statements are upbeat while normative statements are downbeat.
positive statements deal with "what is" while normative statements deal with "what ought to be."

Microeconomics studies

households only.
small investment accounts.
how individual consumers or households interact with firms in markets.
small social and economic units.
firms only.

Macroeconomics differs from microeconomics in that

macroeconomics studies international trade.
macroeconomics looks at the national economy and microeconomics looks at individual parts of the national economy
macroeconomics focuses on the national level, microeconomics focuses on the individual level, and midieconomics focuses on the intermediate level.
microeconomics looks at overall unemployment, production, and inflation.
microeconomics is more relevant to current issues than macroeconomics.

Goods and services are

things and activities that consumers, but not firms, consider valuable.
inputs that are used in production.
typically produced by the government in capitalist countries.
all those things and activities that consumers, firms, and the government consider valuable.
considered to be temporary products.

The economist's assumption that consumers make choices in a way consistent with maximizing their satisfaction is called

self-absorption theory.
unfettered maximization.
the market behavior model.
psychological rationality.
rational self-interest.

The profit motive is important to a market-based economy because

the pursuit of profit builds character.
it leads to a powerful ruling class.
it supports the democratization of societies.
it provides retirement income for company owners and their employees.
profits create a powerful incentive for companies to meet consumer demand.

One of the primary functions of an economic system is to

provide social cohesion.
provide maximum wealth for those in power.
provide a mechanism for allocating goods and services.
provide a "safety net" for the unemployed.
promote income equality.

A market-based economic system allocates goods and services among demanders based on

reputation.
social class.
price.
political party affiliation.
tradition.

Supply is defined as the

amount of a good or service sellers actually sell in the marketplace.
quantity of a good or service that demanders are willing and able to purchase at various prices.
excess of what is produced over what is actually sold.
maximum quantity sellers are capable of bringing to the marketplace.
quantity of a good or service that sellers are willing and able to produce at various prices over a given period of time.

Demand is defined as the

quantity of a good or service consumers are willing but not able to purchase on any given day.
ideal amount consumers wish to purchase.
quantity of a good or service consumers are willing and able to purchase at various prices over a given time period.
level of intensity of desire for a particular good or service.
quantity of a good or service that consumers are willing and able to sell at various prices.

If you were deciding whether to study an extra hour by comparing the benefit (material learned) to the cost (doing something else) for that hour, you are using

non-rationality modeling.
economic modeling.
marginal analysis.
over-simplistic assumptions.
profitability analysis.

Which of the following is the best example of the use of marginal analysis?

A state university decides to raise tuition to cover rising costs.
A gambler places a bet on a game he thinks is a sure win.
A stock analyst discovers that the stock of a company he tracks is undervalued.
K-Mart signs a contract for a new clothing brand.
Wal-Mart estimates the cost of building a store in a new location and compares it to expected revenue generated.

Marginal cost is the

cost of consuming or producing an additional unit.
price of an item of marginal quality.
price of an item that has been discounted.
cost of placing an additional unit in inventory.
Testgen questions still do not copy to other applications.price of an excess good.
Answer: 1

#1. When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

a.

scarcity.

b.

surpluses.

c.

inefficiencies.

d.

inequalities.

#2. Economists use the word equality to describe a situation in which

a.

each member of society has the same income.

b.

each member of society has access to abundant quantities of goods and services, regardless of his or her income.

c.

society is getting the maximum benefits from its scarce resources.

d.

society's resources are used efficiently.

#3. Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

a.

is more efficient and more equal for society.

b.

is more efficient but less equal for society.

c.

is more equal but less efficient for society.

d.

is less equal and less efficient for society.

#4. Which of the following is not an example of the opportunity cost of go ing to school?

a.

The money a student could have earned by working if he had not gone to college.

b.

The nap a student could have enjoyed if he had not attended class.

c.

The party a student could have enjoyed if he had not stayed in to study for his exam.

d.

The money a student spends on rent for his apartment while attending school.

#5. According to a recent study of Chilean bus drivers, drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour. This result is an example of which principle of economics?

a.

People face tradeoffs.

b.

The cost of something is what you give up to get it.

c.

Rational people think at the margin.

d.

People respond to incentives.

#6. True or False - Inflation is the primary determinant of a country's living standards.

#7. In conducting their research, economists face an obstacle that not all scientists face; specifically, in economics, it is often difficult and some- times impossible to

a.

make use of theory and observation.

b.

rely upon the scientific method.

c.

conduct laboratory experiments.

d.

find articles or books that were written before 1900.

#8. Any point on a country's production possibilities frontier represents a combination of two goods that an economy

a.

will never be able to produce.

b.

can produce using all available resources and technology.

c.

can produce using some portion, but not all, of its resources and technology.

d.

may be able to produce in the future with more resources and/or superior technology.

#9. One way to characterize the difference between positive statements and normative statements is as follows:

a.

Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future.

b.

Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.

c.

Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation.

d.

Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements.

#10. Policies such as rent control and trade barriers persist in spite of the fact that economists are virtually united in their opposition to such poli cies, probably because

a.

economists have not yet convinced the general public that the policies are undesirable.

b.

economists engage in positive analysis, not normative analysis.

c.

economists have values that are different from the values of most non-economists.

d.

economists’ theories are not easily confirmed or refuted in laboratory analysis.

#11. How did the influential economist John Maynard Keynes explain his re mark that though economics is an easy subject compared with the high- er branches of philosophy or pure science, it is a subject at which few excel?

a.

Most people who study economics are not very bright.

b.

Good economists must possess a rare combination of gifts.

c.

Economics is quite boring; hence, people tend to lose interest in it before mastering it.

d.

Good thinkers become frustrated with economics because it does not make use of the scientific method.

#12. True or False - In the circular-flow diagram, factors of production in- clude land, labor, and cap ital.

#13. Regan grows flowers and makes ceramic vases. Jayson also grows flow- ers and makes ceramic vases, but Regan is better at producing both goods. In this case, trade could

a.

benefit both Jayson and Regan.

b.

benefit Jayson, but not Regan.

c.

benefit Regan, but not Jayson.

d.

benefit neither Jayson nor Regan.

#14. Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following state- ments is true?

a.

Both countries could gain from trade with each other.

b.

Neither country could gain from trade with each other because Cornland has an absolute advantage in both goods.

c.

Neither country could gain from trade with each other because neither one has a comparative advantage.

d.

Oatland could gain from trade between the two countries, but Cornland definitively would lose.

#15. Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce ei ther 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initi ated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Sylvania will now be able to consume a maximum of

a.

30 units of corn and 30 units of wheat.

b.

40 units of corn and 30 units of wheat.

c.

40 units of corn and 20 units of wheat.

d.

10 unites of corn and 40 units of wheat.

#16. The gains from trade are

a.

evident in economic models, but seldom observed in the real world.

b.

evident in the real world, but impossible to capture in economic models.

c.

a result of more efficient resource allocation than would be observed in the absence of trade.

d.

based on the principle of absolute advantage.

#17. Suppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in auto parts. Also suppose the US has an absolute advantage in the production of both semiconductors and auto parts. The US should

a.

not trade semiconductors and auto parts with Mexico.

b.

import semiconductors from Mexico and export auto parts to Mexico.

c.

export semiconductors to Mexico and import auto parts from Mexico.

d.

export both semiconductors and auto parts to Mexico.

#18. True or False - It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers.

#19. In a competitive market, the price of a product

a.

is determined by buyers, and the quantity of the product produced is determined by sellers.

b.

is determined by sellers, and the quantity of the product produced is determined by buyers.

c.

and the quantity of the product produced are both determined by sellers.

d.

None of the above is correct.

#20. The term price takers refers to buyers and sellers in

a.

perfectly competitive markets.

b.

monopolistic markets.

c.

markets that are regulated by the government.

d.

markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

#21. Which of the following is not a determinant of demand?

a.

the price of a resource that is used to produce the good

b.

the price of a complementary good

c.

the price of the good next month

d.

the price of a substitute good

#22. A market supply curve shows how the total quantity supplied of a good varies as

a.

production technology varies.

b.

price varies.

c.

input prices vary.

d.

demand varies.

#23. Which of the following events could cause an increase in the supply of ceiling fans?

a.

The number of sellers of ceiling fans increases.

b.

There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes.

c.

There is an increase in the price of the motor that powers ceiling fans.

d.

All of the above are correct.

#24. True or False - Whenever a determinant of supply other than price changes, the supply curve shifts.

#25. Elasticity is

a.

a measure of how much buyers and sellers respond to changes in market conditions.

b.

the study of how the allocation of resources affects economic well-being.

c.

the maximum amount that a buyer will pay for a good.

d.

the value of everything a seller must give up to produce a good.

#26. If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

a.

immediately after the price increase

b.

one month after the price increase

c.

three months after the price increase

d.

one year after the price increase

#27. Whether a good is a luxury or necessity depends on the

a.

price of the good.

b.

preferences of the buyer.

c.

intrinsic properties of the good.

d.

scarcity of the good.

#28. When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price elasticity of demand for bracelets is about

a.

1.66.

b.

1.06.

c.

0.94.

d.

0.60.

#29. When the price of used cds is $4, Daphne buys five per month. When the price is $3, she buys nine per month. Daphne's demand for used cds is

a.

elastic, and her demand curve would be relatively flat.

b.

elastic, and her demand curve would be relatively steep.

c.

inelastic, and her demand curve would be relatively flat.

d.

inelastic, and her demand curve would be relatively steep.

#30. True or False - The demand for soap is more elastic than the demand for Dove soap.

#31. Price controls are usually enacted

a.

as a means of raising revenue for public purposes.

b.

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

c.

when policymakers detect inefficiencies in a market.

d.

All of the above are correct.

#32. A price ceiling will be binding only if it is set

a.

equal to the equilibrium price.

b.

above the equilibrium price.

c.

below the equilibrium price.

d.

either above or below the equilibrium price.

#33. A price floor is

a.

a legal minimum on the price at which a good can be sold.

b.

often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor.

c.

a source of inefficiency in a market.

d.

All of the above are correct.

Figure 1-1

Panel (a)

Panel (b)

#34. Refer to Figure 1-1. In panel (b), there will be

a.

a shortage of wheat.

b.

equilibrium in the market.

c.

a surplus of wheat.

d.

lines of people waiting to buy wheat.

Figure 1-2

#35. Refer to Figure 1-2. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2,

a.

the market price will increase to P3.

b.

a surplus will occur at the new market price of P2.

c.

the market price will stay at P1.

d.

a shortage will occur at the new market price of P2.

#36. Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

a.

The effective price received by sellers is $0.40 per bottle less than it was before the tax.

b.

Sixty percent of the burden of the tax falls on sellers.

c.

This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume.

d.

All of the above are correct.

#37. When a tax is placed on the buyers of lemonade, the

a.

sellers bear the entire burden of the tax.

b.

buyers bear the entire burden of the tax.

c.

burden of the tax will be always be equally divided between the buyers and the sellers.

d.

burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

Figure 1-3

The vertical distance between points A and B represents the tax in the market.

#38. Refer to Figure 1-3. The price that buyers pay after the tax is imposed is

a.

$8.

b.

$10.

c.

$16.

d.

$24.

#39. Refer to Figure 1-3. The effective price that sellers receive after the tax is imposed is

a.

$6.

b.

$10.

c.

$16.

d.

$24.

#40. Refer to Figure 1-3. The amount of the tax per unit is

a.

$6.

b.

$8.

c.

$14.

d.

$18.

#41. True/False - The tax burden falls more heavily on the side of the market that is more inelastic.

#42. True/False - Even though federal law mandates that workers and firms each pay half of the total FICA tax, the tax burden may not fall equally on workers and firms.

Answer: d
Answer: 3
Answer: Normative economics is a perspective of "what ought to be" rather than...
Answer: Normative economics is a perspective of "what ought to be" rather than...
Answer: Normative economics is a perspective of "what ought to be" rather than...
Answer: Normative economics is a perspective of "what ought to be" rather than...
Answer: Normative economics is a perspective of "what ought to be" rather than...
Answer: Normative economics is a perspective of "what ought to be" rather than...
Answer:Hence, the total revenue depends on the number of units sold and the pr...
Answer:Hence, the total revenue depends on the number of units sold and the pr...
Answer:Hence, the total revenue depends on the number of units sold and the pr...
Answer:Hence, the total revenue depends on the number of units sold and the pr...
Answer:Hence, the total revenue depends on the number of units sold and the pr...
Answer:Hence, the total revenue depends on the number of units sold and the pr...
Answer: c
Answer: d
Answer: b
Answer: b
Answer: a

Question 1: Suppose in March the nominal interest rate (on new lending) is 10% while expected inflation is 4%. However, by October the expected inflation rate has risen to 7%. Other things the same in borrowing and lending markets, in October (for new lending),

a.

the nominal interest rate is 10% and the real interest rate is 3%

b.

the nominal interest rate is 10% and the real interest rate is 6%

c.

the nominal interest rate is 10% and the real interest rate is 9%

d.

the nominal interest rate is 13% and the real interest rate is 3%

e.

the nominal interest rate is 13% and the real interest rate is 6%

f.

the nominal interest rate is 13% and the real interest rate is 9%

Question 2: In Year 1, a fixed 9% nominal interest rate loan is signed. At the time, annual inflation was expected to be 5%. Looking back from Year 3, inflation actually turned out to be 2%. In retrospect, the real interest rate actually turned out to be,

a.

3%

b.

4%

c.

7%

d.

9%

Question 3: In Year 1, a fixed 12% nominal interest rate loan is signed. At the time, annual inflation was expected to be 4%. Looking back from Year 4, inflation actually turned out to be 8%. Regarding this loan, the unexpected rate of inflation,

a.

helped the borrower and helped the lender

b.

helped the borrower and hurt the lender

c.

hurt the borrower and helped the lender

d.

hurt the borrower and hurt the lender

Question 4: Suppose the nominal wage is fixed for the year. At the beginning of the year, annual inflation was expected to be 6%. Looking back at the end of the year, inflation actually turned out to be 2%. The unexpected rate of inflation,

a.

helped employers and helped employees

b.

helped employers and hurt employees

c.

hurt employers and helped employees

d.

hurt employers and hurt employees

Question 5: Suppose a typical household in Country Z buys (just) 20 pumpkins per year and 10 pounds of apples per year. In Year 1, the price of pumpkins is $4. In Year 2, the price of pumpkins is $5. In Year 1, the price of apples is $1.50 a pound . In Year 2, the price of apples is $1 a pound. The CPI inflation rate for Country Z for the Year 2 is,

a.

-4.2%

b.

8.3%

c.

9.1%

d.

13.6%

e.

15.8%

Question 6: In 2014, Savannah's nominal income was $56,000. And in 2017, Savannah's nominal income was $57,500. In 2014 the price index was 163.8 and in 2017 the price index was 171.2. The percent change in Savannah's real income from 2014 to 2017 was,

a.

-2.6%

b.

-1.8%

c.

1.8%

d.

2.7%

e.

4.5%

Question 7: Suppose the price index for a country was 183.6 in 2012, was 188.5 in 2013, and was 191.0 in 2014. The inflation rate for 2013 for the country was,

a.

-1.3%

b.

1.3%

c.

2.0%

d.

2.7%

Question 8: Suppose the price of computer tablets in 2016 was $230, while the price of the higher quality tablets produced in 2017 was $290. The inflation rate for computer tablets for 2017 was (to one decimal point) 26.1%

True

False

Answer: b
Answer: a
Answer: d
Answer: d

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