Chapter 12 Unemployment and Inflation

| November 9, 2018

7)
Suppose that the CPI in Egypt was 111 in 2011 and 122 in 2012. The inflation
rate between those two years was approximately
A)
4.8%.
B)
5.5%.
C)
9.9%.
D)
11%.

8)
Suppose that in 2011 the chain-weighted price index for GDP in Estonia is 220
and the chain-weighted price index in Lithuania is 160. In 2012 the price index
in Estonia is 242 and the price index in Lithuania is 180. You could conclude
that
A)
Estonia is a more expensive place to live than Lithuania.
B)
Lithuania is a more expensive place to live than Estonia.
C)
Estonia’s rate of inflation is higher than Lithuania’s.
D)
Lithuania’s rate of inflation is higher than Estonia’s.

9)
In the United States during the 1950s and 1960s
A)
the inflation rate was frequently less than 2% a year.
B)
prices fell.
C)
prices rose sharply.
D)
there was zero inflation.

10)
The biggest problem caused by a deflation is that
A)
prices fall.
B)
wages fall.
C)
people cannot repay their debts.
D)
interest rates rise.

11)
Inflation must be high in Moscow because it is very expensive to live there.

12)
Since the 1930s the United States has experienced continuous deflation.

13)
Critically evaluate the statement “Honolulu is an expensive place to live.
Therefore the inflation rate must be high in Honolulu.”

14)
Explain why deflation could prevent people from being able to repay their
debts.

12.6 The Costs of Inflation

1)
Economists call the physical cost of changing prices
A)
the cost of doing business.
B)
menu costs.
C)
inflationary sufferage.
D)
increasing profits.

2)
On what kind of income is our tax system based?
A)
real
B)
nominal
C)
adjusted
D)
inflationary

3)
The costs associated with recalculating prices and printing new price lists
when there is inflation are known as
A)
shoe leather costs.
B)
menu costs.
C)
chain-index costs.
D)
diminishing costs.

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