1. Through periods of inflation, the real value (purchasing power) of a given amount of nominal dollars decreases.

A) True

B) False

2. The real interest rate can be expressed as the

A) Nominal interest rate minus the real interest rate

B) Inflation rate minus the nominal interest rate

C) Nominal interest rate minus the inflation rate

D) Inflation rate minus the real interest rate

E) Nominal interest rate plus the inflation rate

3. Which period in U.S. economic history was not characterized with inflation?

A) 1917-1920

B) 1929-1933

C) 1947

D) 1978-1980

E) 1980-1989

4. Which of the following events would most probable cause the nominal interest rate to fall?

A) The supply of loan able funds decreases.

B) Both the supply of and the demand for loan able funds increase.

C) Both the supply of and the demand for loan able funds decrease.

D) The supply of loan able funds increases and the demand for loan able funds decreases.

E) The supply of loan able funds decreases and the demand for loan able funds increases.

5. If the aggregate supply curve shifts leftward,

A) The price level increases and output increases

B) The price level decreases and output increases

C) The resulting increase in the price level is usually called demand-pull inflation

D) The resulting increase in the price level is usually called cost-push inflation

E) The price level increases only if there is also a rightward shift of the aggregate demand curve

6. Hyperinflation refers to a situation in which

A) Prices are rising extremely rapidly

B) Prices are falling extremely rapidly

C) The price level is extremely high

D) The price level is extremely low

E) The price level is negative

7. The impact of __________ unemployment is removed from official unemployment figures that are reported monthly.

A) Cyclical

B) Structural

C) Seasonal

D) Frictional

E) Involuntary

8. Which of the following statements about unemployment is true?

A) There is only one kind of unemployment.

B) Some unemployment exists even when the economy is healthy and growing.

C) Unemployment and inflation are not related.

D) People who are willing and able to work however have given up the search for a job are considered unemployed.

E) Voluntary unemployment refers to a situation in which people who really do not want to work only pretend to look for jobs.

9. Presume you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

A) Your real wage fell.

B) Your nominal wage fell.

C) Both your real and nominal wages decreased.

D) Although your nominal wage fell, your real wage increased.

E) Both your real and nominal wages increased.

10. Gauged unemployment includes discouraged workers.

A) True

B) False

11. Which of the following people is least probable to be hurt by inflation?

A) A salesperson who works on commission

B) A retired couple living on a pension

C) An individual who works under a labor contract calling for a fixed wage for the next three years

D) An individual who contracts to lend money for a fixed rate of interest for the next three years

E) An individual working at the minimum wage (which seldom changes)

12. Deflation refers to

A) Decreasing relative prices

B) A decreasing price level

C) A slowing down of the rate of inflation

D) A slowing down of the rate of relative price decreases

E) A federal government policy of running budget surpluses

13. As a result of hyperinflation,

A) Real GDP rose faster in Brazil than did nominal GDP

B) Foreigners rushed to invest in Brazil

C) Brazilians tried to spend money just as soon as they received it

D) Brazilians spent more time speculating in currency than they spent producing goods and services

E) The Brazilian economy collapsed