Unit 4 Quiz 3

What is the definition of inflation?

• A) A decrease in the general price level of goods and services

• B) An increase in the general price level of goods and services

• C) A measure of the total output of an economy

• D) The difference between exports and imports

What is the difference between nominal wage and real wage?

• A) Nominal wage is adjusted for inflation, real wage is not

• B) Real wage is adjusted for inflation, nominal wage is not

• C) Nominal wage is the wage after taxes, real wage is before taxes

• D) Real wage is the wage after taxes, nominal wage is before taxes

How is the Consumer Price Index (CPI) calculated?

• A) By measuring the total output of an economy

• B) By comparing the current prices of a basket of goods and services to the prices in a base year

• C) By calculating the difference between exports and imports

• D) By summing up the total income of all individuals in an economy

What is the difference between real GDP and nominal GDP?

• A) Real GDP is adjusted for inflation, nominal GDP is not

• B) Nominal GDP is adjusted for inflation, real GDP is not

• C) Real GDP includes only goods, nominal GDP includes goods and services

• D) Nominal GDP includes only goods, real GDP includes goods and services

How does inflation affect the purchasing power of money?

• It increases the purchasing power of money

• It has no effect on the purchasing power of money

• It reduces the purchasing power of money

• It stabilizes the purchasing power of money

Which of the following individuals is likely to be hurt by unanticipated inflation?

• A. A man who lent out $500 to his friend in 1960 and gets paid back in 2020.

• B. A tenant who pays $850 for rent each month.

• C. An elderly couple living off fixed retirement payments of $2000 a month.

• D. A man that borrowed $1,000 in 1995 and paid it back in 2014.

Which of the following individuals is likely to be helped by unanticipated inflation?

• A. A woman who saved $500 in 1950 by putting it under her mattress.

• B. A tenant who pays $850 for rent each month.

• C. An elderly couple living off fixed retirement payments of $2000 a month.

• D. A man that borrowed $1,000 in 1995 and paid it back in 2014.

Who is hurt by unanticipated inflation?

• Borrowers

• People with fixed incomes

• A business where the price of the product increases faster than the price of resources

• People who borrow money

Who is helped by unanticipated inflation?

• Lenders

• Savers

• Borrowers

• People with fixed incomes

How does the government track inflation?

• By measuring the GDP growth

• By tracking the prices of specific "market baskets"

• By monitoring employment rates

• By evaluating export and import values