Question

The GDP gap is the difference between: a. frictional unemployment and actual real GDP. b. unemployment rate and real GDP deflator. c. actual real GDP and full-employment real GDP. d. full-employment real GDP and real GDP deflator. Inflation is an increase in: a. prices of all products in the economy. b. homes, autos and basic resources. c. the general price level of products. d. none of these. 46. Suppose that last year you borrowed $100 at 5 percent interest to purchase a $100 pair of Nike cross-training shoes. This year you repaid the bank with interest. If the inflation rate was 10 percent last year, your purchase of the shoes would: a. make you an inflation winner as you saved $5 on the shoes. b. make you an inflation loser as you paid $5 more than you should have for the shoes. c. not be affected at all by the inflation rate. d. be taxed according to COLA adjustments. e. make you an inflation loser because of bracket creep. 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. A reduction in the rate of inflation is called: a. deflation. b. disinflation. c. hyperinflation. d. cost-push inflation. Last year the Jones family earned $40,000. This year their income is $42,000. In an economy with an inflation rate of 10 percent, which of the following is correct? a. The Jones' nominal income and real income have both fallen. b. The Jones' nominal income and real income have both risen. c. The Jones' nominal income has increased and their real income has fallen. d. The Jones' nominal income has decreased and their real income has risen. 50. Suppose you place $10,000 in a retirement fund that earns a nominal interest rate of 8 percent. If you expect inflation to be 5 percent or lower, then you are expecting to earn a real interest rate of at least: a. 1.6 percent. b. 3 percent. c. 4 percent. d. 5 percent.

Answer 1

(44) Ans: (C) full embloune heut the app gap is difference between actual real app and app- (45) Ans: (e) Inflation means there is rise in the general frie kend. (46) Ans (a) Rise in anflation makes the borrower beneficial. (47) Aust (6) during ou high Inflation rate, the purchasing power дас(арх (46) Ane . (6) disinflation is called the decrease in suflation. (49) Ans: 10) na ancome has decreased as etru deflation rate is lasher lasear Chens even the the nominal rise en now the income.