Macroeconomics final

The term inflation is used to describe a situation in which
a. stock market prices have risen over the past two quarters
b. incomes in the economy are increasing at a sustained rate
c. the economy is growing rapidly
d. there is a sustained increase in the overall level of prices in the economy

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The threat of future inflation:
a. increases the value of money paid back in the future
b. has no effect on loaning money
c. makes people reluctant to loan money for long periods
d. makes people eager to loan money for long periods

when unanticipated inflation increases, the typical family
a. finds that its standard of living is not affected
b. finds that the prices of every good and service it purchases are higher
c. has to spend fewer dollars to maintain the same standard of living
d. has to spend more dollars to maintain the same standard of living

When hyperinflation forces Milo to change the price stickers on the books in his bookstore very frequently to keep up with the aggregate price level, economists say Milo is experiencing a:
a. debt deflation
b. unit-of-account cost
c. shoe leather cost
d. menu cost

Disinflation:
a. results in a fall in the unemployment rate
b. occurs as a result of a policy makers' attempts to correct a major recession
c. involves eliminating inflation in an economy
d. policy often results in throwing an economy into a major recession

From the standpoint of economic growth, banks are important to:
a. channel investment into savings
b. channel savings into investment
c. fight inflation
d. keep interest rates low

you have gone to the bank to borrow money for one year. the nominal rate is 7.5%. The real rate of interest is 4%. Over the course of the year, overall prices increased by 4%. This rate of inflation hurt the ____ because the actual rate of inflation was ______ than anticipated rate of inflation
a. lender; lower
b. borrower; lower
c. borrower; higher
d. lender; high

suppose a bank wishes to make a 5% rate of return on a one year loan but expects that inflation over the course of the loan will be roughly 3%. Which of the following is TRUE?
a. if the bank charges 8% and the inflation rate is more than 3%, then the bank will have earned a larger rate of return than expected
b. as long as the bank charges a nominal interest rate of at least 5%, it will earn its expected return
c. if the bank charges an interest rate of 8% or higher, this will absolutely guarantee it to earn the expected return
d. if the bank charges 8% and the inflation rate is less than 3%, then the bank will have earned a larger rate of return

Economists use real GDP per capita to measure economic growth:
a. because poor nations have larger population size whereas the richer nations are experiencing a decline in their population
b. because it represents the inflation adjusted value of a country's production of goods and services corrected for the effects of changes in a country's population
c. although the real GNP per capita is a far superior measure of economic growth
d. because it is measured by almost all the countries in the world, thus this can be readily used

workers today are more productive than workers in the past because:
a. workers now have more physical capital embodying better technology to work with
b. there are more workers now working with the same number of machines than in the past
c. they are paid more
d. workers are now physically stronger on average

Macroeconomics final

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