PE Chapter30

Over the past 80 years, prices in the U.S. have risen on average about

A. 2 percent per year.

B. 4 percent per year.

C. 3.6 percent per year.

D. 6 percent per year.

• A

• B

• C

• D

Inflation can be measured by the

A. change in the consumer price index.

B. percentage change in the consumer price index.

C. percentage change in the price of a specific commodity.

D. change in the price of a specific commodity.

• A

• B

• C

• D

In which of the following cases was the inflation rate 12 percent over the last year?

• One year ago the price index had a value of 110 and now it has a value of 120.

• One year ago the price index had a value of 120 and now it has a value of 132.

• One year ago the price index had a value of 134 and now it has a value of 150.

• One year ago the price index had a value of 145 and now it has a value of 163.

If the price level increased from 200 to 250, then what was the inflation rate?

A. 50 percent

B. 25 percent

C. 20 percent

D. None of the above is correct.

• A

• B

• C

• D

Deflation

• increases incomes and enhances the ability of debtors to pay off their debts.

• increases incomes and reduces the ability of debtors to pay off their debts.

• decreases incomes and enhances the ability of debtors to pay off their debts.

• decreases incomes and reduces the ability of debtors to pay off their debts.

The term hyperinflation refers to

A. the spread of inflation from one country to others.

B. a decrease in the inflation rate.

C. a period of very high inflation.

D. inflation accompanied by a recession.

• A

• B

• C

• D

There was hyperinflation during the

A. period 1880-1896 in the United States.

B. 1970s in the United States.

C. early part of the current century in Zimbabwe.

D. All of the above are correct.

• A

• B

• C

• D

The classical theory of inflation

• is also known as the quantity theory of money.

• was developed by some of the earliest economic thinkers.

• is used by most modern economists to explain the long-run determinants of the inflation rate.

• All of the above are correct.

When the price level rises, the number of dollars needed to buy a representative basket of goods

A. increases, and so the value of money rises.

B. increases, and so the value of money falls.

C. decreases, and so the value of money rises.

D. decreases, and so the value of money falls

• A

• B

• C

• D

The value of money rises as the price level

• rises, because the number of dollars needed to buy a representative basket of goods rises.

• rises, because the number of dollars needed to buy a representative basket of goods falls.

• falls, because the number of dollars needed to buy a representative basket of goods rises.

• falls, because the number of dollars needed to buy a representative basket of goods falls.