Question

Inflation is undesirable because it:

Question 1 options:

A)	invariably leads to hyperinflation.

B)	arbitrarily redistributes real income and wealth.

C)	reduces everyone's standard of living.

D)	usually is accompanied by declining real GDP.

Question 2

Which of the following will not tend to shift the consumption to increase?

Question 2 options:

A)	A currently small stock of durable goods in the possession of consumers.

B)	The expectation of a future decline in the consumer price index.

C)	The expectation of future shortages of essential consumer goods.

D)	A currently low level of household debt.

Question 3

Dissaving means:

Question 3 options:

A)	the same thing as disinvesting.

B)	that households are spending more than their current incomes.

C)	that saving and investment are equal.

D)	that disposable income is less than zero

Question 4

If the MPC is .8 and disposable income is $200, then:

Question 4 options:

A)	saving will be $20.

B)	saving will be $40.

C)	personal consumption expenditures will be $80.

D)	consumption and saving cannot be determined from the information given.

Question 5

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

Question 5 options:

A)	deflation of 4 percent.

B)	inflation of 3.33 percent.

C)	deflation of 3.33 percent.

D)	inflation of 4 percent.

Answer 1

a1)	option B is the correct answer
	arbitrarily redistributes real income and wealth.
a2)	option B is the correct answer
	The expectation of a future decline in the consumer price index
a3)	option B is the correct answer
	that households are spending more than their current incomes.
a4)	option D
	consumption and saving cannot be determined from the information given.
a5)	option C
	deflation of 3.33 percent.