Question

1.	Jordan loaned Taylor $1,200 on March 15, 2009. Taylor returned $1,260 on March 14, 2010. Inflation was 2% over the 1-year period. What is the real interest rate that Taylor paid?
		5% 2% 3% 7%

	2.	Which of the following is an example of money illusion assuming that inflation is 5%?
		You receive a 10% raise at your part-time job and start spending extra money on entertainment every weekend. You do not receive a raise at your part-time job but cut out some expenses as you notice some prices rising. You receive a 5% raise at your part-time job and start spending extra money on entertainment every weekend. You receive a 5% raise at your part-time job but do not increase or decrease your spending.

	3.	The primary reason we think of inflation as bad even when wages rise with it is that it:
		increases the velocity of money. makes things more expensive for consumers. leads to lower real wages. distorts the information delivered by prices.

	4.	Suppose the nominal GDP of a country is $500 billion. If the velocity of money in the country is 10, then the country's money supply will equal:
		$5,000 billion. $50 billion. $490 billion. $510 billion.

	5.	The average number of times a dollar is spent on final goods and services during a year is the:
		velocity of money. quantity theory of money. consumption rate. money supply.

	6.	If the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between years 1 and 2 will be:
		8.33%. 9.23%. 7.69%. 10%.

	7.	In a small economy, the money supply is $400,000, and the velocity of money is 3. The current average price level in the economy is 1. What is the level of real GDP in this economy?
		$133,333 $1.6 million $1.2 million $400,000

	8.	When the expected rate of inflation is higher than the actual rate of inflation, wealth is:
		redistributed from borrowers to lenders. not redistributed at all. redistributed at random. redistributed from lenders to borrowers.

	9.	Money illusion is:
		mistaking changes in nominal prices for changes in real prices. an increase in the average level of prices. the average number of times a dollar is spent on final goods and services in a year. a decrease in the average level of prices.

	10.	Inflation is:
		a decrease in the average level of prices. an increase in the average level of prices. when people mistake changes in nominal prices for changes in real prices. the average number of times a dollar is spent on final goods and services in a year.

	11.	The quantity theory of money predicts that the main cause of inflation is increases in:
		prices. the money supply. consumption. real output.

	12.	If the money supply is $375 million, the velocity of money is 5, and real GDP is $12.5 million, what is the average price level?
		50 12.5 100 150

	13.	According to the quantity theory of money, an increase in the money supply causes an increase in _____ over the long run.
		real GDP the velocity of money production prices

	14.	With respect to real output, in the long run, money is:
		neutral. expansionary. velocity. temporary.

	15.	When the price of a good in Russia increases from 20 rubles to 20 million rubles in a single year, the nation is experiencing:
		hyperinflation. deflation. falling GDP per capita. high disinflation.

	16.	If you earned $10-an-hour in 2005 when the CPI was 100, and you earn $11-an-hour today when the CPI is 120, then your real wage rate has _____ since 2005.
		remained the same increased 20% increased 10% decreased

	17.	A real price is:
		a decrease in the average level of the price of a good. an increase in the average level of the price of a good. the average number of times a dollar is spent on final goods and services in a year. a price that has been corrected for inflation.

	18.	Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator?
		The CPI measures the average prices of retail goods and services, whereas the GDP deflator measures the average prices of wholesale goods. The CPI measures the average prices of all final goods and services purchased by consumers, whereas the GDP deflator measures the average prices of all inputs used in the economy. The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy. The CPI measures the average prices of inputs in the production process, whereas the GDP deflator measures the average prices of goods and services purchased by consumers.

	19.	Which of the following is a problem with deflation?
		Stopping it will cause a recession. It causes people to pay more taxes. It raises the real cost of debt repayment. There is no problem with deflation; falling prices are good for the economy.

	20.	Debt monetization means that a government pays off its debt by:
		raising tax revenues. borrowing from foreigners. lowering inflation. increasing the money supply.

Answer 1

Kindly upvote:)

Owe Fr=1260 know, Fr=Pv (ti)" Criven, n-1, Py=1200, - 1260 = 1200 (1+i)? 1260 (LCU Hi = 0.09 - 51. Real interest rate= market rate – inflation - 57.-27. = y.)