Question

1. The best definition of inflation is a(n): a temporary increase in prices. b. increase in the price of one important commodity such as food. c. persistent increase in the general level of prices as measured by a price index. d. increase in the purchasing power of the dollar. 2. Inflation: a. reduces the cost-of-living of the typical worker. b. is measured by changes in the cost of a typical market basket of goods between time periods. c. causes the purchasing power of a dollar to rise. d. has no effect on real income. 3. Which of the following statements is true? a. Deflation is an increase in the general level of prices. b. The consumer price index (CPI) measures changes in the average prices of consumer goods and services. c. Disinflation is an increase in the rate of inflation. d. Real income is the actual number of dollars received over a period of time. e. The real interest rate equals the nominal rate of interest plus the inflation rate. 4. Inflation is measured by an increase in: a. homes, autos and basic resources. b. prices of all products in the economy. c. the consumer price index (CPI). d. none of these 5. Losers from inflation include: a. savers and borrowers. b. landlords and the government. c. borrowers and the government. d. those on a fixed income and borrowers. e. those on a fixed income and savers. 6. Which one of the following groups benefits from inflation? a. Borrowers. c. Landlords. b. Savers. d. Lenders. 7. In periods of high inflation, a. people want to hold on to as much money as possible. b. the purchasing power of money is decreasing. c. nobody wants to work and earn income. d. low nominal interest rates are likely to result. e. nobody wants to buy goods and services. 8. Suppose that the consumer price index of a country was 160 at Year X and 168 at the end of Year Y. What was the country's inflation rate during Year Y? a. 5 percent. c. 60 percent. b. 8 percent. d. 68 percent.

Answer 1

A=1 The best defination is the presistent general price level price Index of Inflation increase in the measured by A=2 Inflation reduces the cost of living of the worker as the price in the economy rises so it is purchasin e power reduces and will consome less of the goods as earliers so cost of living falls A=3 The consumer price index measure the changes in average price of consumer goods and Services PRADIPP - too Consumer price Index "PO pe P Tottor current price level poi base y ear price level

A=4 The consumer price the Inflation with = l xlool Index the measures formula Ро се A= 5 Loosers from Inflation include - thoose who have fixed Income and are korrovert, Savers S Savers Borcuest loose from Inflation t because their nomina real interest rate will fall Thoose who have fired income their real income will fall. n alalalalala AEG Lenders will benefit A=6 Borrowers Benefit from inflation as real interest rate will fall A=8 Rate of Inflation & Toy = 5% too ator ans =57

- A=7 The purchasing power of money. is decreasing n durine inflation as less less Commodity is consumed during the inflation so the money is not able to consum I buy much of the commodity as perivious