Question

1) In 1991, the CPI was 131.1 and in 1997 the CPI was 158.2. What was the rate of inflation over this period of time?

Select one:

a. 27.1 percent.

b. 31.1 percent.

c. 16.5 percent.

d. 20.7 percent.

e. 17.1 percent.

2)

Cost-push inflation is due to:

Select one:

a. "too much money chasing too few goods."

b. the economy operating at less than full employment.

c. increases in production costs.

d. all of the above.

3) Nominal gross domestic product is based on:

Select one:

a. the existing prices at which final goods and services are actually sold.

b. prices at which intermediate goods are sold.

c. None of the other questions is correct.

d. prices of final goods and services adjusted for inflation.

4)

Higher Medical Bills due to people becoming sick by drinking polluted water will:

Select one:

a. decrease GDP.

b. none of the other answers is correct.

c. increase GDP.

d. cause no change in GDP.

5) Federal Outlays (spending) that are determined by past legislative commitments are known as:

Select one:

a. Wasteful Spending

b. Mandatory Spending

c. Stimulus Spending

d. Deficit Spending

Answer 1

1> If the inflation rate is r,

so, 131.1(1+r)=158.2

r=d. 20.7 percent.

D is the correct option

2> c. increases in production costs.

Cost push inflation is inflation caused by an increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods.

3> a. the existing prices at which final goods and services are actually sold.

For the nominal GDP, it is not adjusted with respect to inflation.

4> a. decrease GDP.

The labor supply will decrease and thus the GDP will fall