Chapter 30 Money Growth and Inflation
1. Over the past 70 years, prices in the U.S. have risen on
average about
a.
2 percent per year.
b.
4 percent per year.
c.
6 percent per year.
d.
8 percent per year.
2. Over the past 70 years, the overall price level in the U.S.
has experienced a(n)
a.
4-fold increase.
b.
8-fold increase.
c.
12-fold increase.
d.
16-fold increase.
4. Inflation can be measured by the
a.
change in the consumer price index.
b.
percentage change in the consumer price index.
c.
percentage change in the price of a specific commodity.
d.
change in the price of a specific commodity.
5. Which of the following is not correct?
a.
The inflation rate is measured as the percentage change in a
price index.
b.
For the last 40 or so years, U.S. inflation hasn’t shown much
variation from its average rate of about 2 percent.
c.
During the 19th century there were long periods of falling
prices in the U.S.
d.
Some economists argue that the costs of moderate inflation are
not nearly as large as the general public believes.
6. In which of the following cases was the inflation rate 10
percent over the last year?
a.
One year ago the price index had a value of 110 and now it has
a value of 120.
b.
One year ago the price index had a value of 120 and now it has
a value of 132.
c.
One year ago the price index had a value of 126 and now it has
a value of 140.
d.
One year ago the price index had a value of 145 and now it has
a value of 163.
7. If the price level increased from 120 to 126, then what was
the inflation rate?
a.
3 percent
b.
5 percent
c.
6 percent
d.
None of the above is correct.
8. If the price level increased from 120 to 150, then what was
the inflation rate?
a.
30 percent
b.
25 percent
c.
20 percent
d.
None of the above is correct.
9. When prices are falling, economists say that there is
a.
disinflation.
b.
deflation.
c.
a contraction.
d.
an inverted inflation.
10. Deflation
a.
increases incomes and enhances the ability of debtors to pay
off their debts.
b.
increases incomes and reduces the ability of debtors to pay
off their debts.
c.
decreases incomes and enhances the ability of debtors to pay
off their debts.
d.
decreases incomes and reduces the ability of debtors to pay
off their debts.
11. The term hyperinflation refers to
a.
the spread of inflation from one country to others.
b.
a decrease in the inflation rate.
c.
a period of very high inflation.
d.
inflation accompanied by a recession.
12. Which of the following statements about U.S. inflation is
not correct?
a.
Low inflation was viewed as a triumph of President Carter's
economic policy.
b.
There were long periods in the nineteenth century during which
prices fell.
c.
The U.S. public has viewed inflation rates of even 7 percent
as a major economic problem.
d.
The U.S. inflation rate has varied over time, but
international data show even more variation.
13. Which of the following statements concerning the history
of U.S. inflation is not correct?
a.
Prices rose at an average annual rate of about 4 percent over
the last 70 years.
b.
There was about a 16-fold increase in the price level over the
last 70 years.
c.
Inflation in the 1970s was below the average over the last 70
years.
d.
The United States has experienced periods of deflation.
14. Which of the following is correct?
a.
A period of hyperinflation is a period of extraordinarily low
inflation.
b.
A period of deflation is any period during which the inflation
rate is decreasing.
c.
During the 1990s, U.S. inflation averaged about 2 percent per
year.
d.
All of the above are correct.
15. Economists agree that
a.
neither high inflation nor moderate inflation is very
costly.
b.
both high and moderate inflation are quite costly.
c.
high inflation is costly, but they disagree about the costs of
moderate inflation.
d.
moderate inflation is as costly as high inflation.
16. The classical theory of inflation
a.
is also known as the quantity theory of money.
b.
was developed by some of the earliest economic thinkers.
c.
is used by most modern economists to explain the long-run
determinants of the inflation rate.
d.
All of the above are correct.
17. The quantity theory of money
a.
is a fairly recent addition to economic theory.
b.
can explain both moderate inflation and hyperinflation.
c.
argues that inflation is caused by too little money in the
economy.
d.
All of the above are correct.
18. To explain the long-run determinants of the price level
and the inflation rate, most economists today rely on the
a.
quantity theory of money.
b.
price-index theory of money.
c.
theory of hyperinflation.
d.
disequilibrium theory of money and inflation.
19. When the price level falls, the number of dollars needed
to buy a representative basket of goods
a.
increases, so the value of money rises.
b.
increases, so the value of money falls.
c.
decreases, so the value of money rises.
d.
decreases, so the value of money falls.
20. When the price level rises, the number of dollars needed
to buy a representative basket of goods
a.
increases, and so the value of money rises.
b.
increases, and so the value of money falls.
c.
decreases, and so the value of money rises.
d.
decreases, and so the value of money falls