12. If the Consumer Price Index rises from 200 to 222 from one year to the next,
ID: 1105229 • Letter: 1
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12. If the Consumer Price Index rises from 200 to 222 from one year to the next, the rate of inta is a. 9.9 percent b. 11 percent c. 22 percent d. 222 percent a. 13. The goal of the consumer price index is to measure changes in Cost of production Cost of living Relative price of consumer goods b. d. Production of consumer goods c. 14. If nominal GDP is rising faster than real GDP: a. b. c. The GDP deflator will be increasing The GDP deflator will be decreasing The economy is experiencing pure inflation d. None of the above 15. Borrowers benefit during periods of unexpected inflation because a. Inflation outpaces wage growth The money they pay lenders is worth more than the money they originally borrowed Interest rates fall c. The purchasing power of the dollars borrowed is greater than the purchasing power of the dollars repaid to lenders d. 16. The current cost of the basket of goods included in the CPl is $3883. The cost of the same basket of goods in the base year was $1772. The current CPl is: a. 177.2 b. 219 c. 388.3 d. 772 17. The unemployment rate equals the number of persons Unemployed divided by the number employed Unemployed divided by the number if the labor force Unemployed divided by the population age 16 and over Not working divided by the population age 16 and over a. b. c. d. Use the following data to answer the next question 50 million Number in the labor force30 million Number employed full time 20 million Number employed part time 8 million 2 million Populatiorn Number unemployed 18. What is the unemployment rate of the economy? a. 4.0 percent b. 6.7 percent c. 7.1 percent d. 10.0 percent 19. Frictional unemployment means a. There are not enough jobs to go around b. Jobs are plentiful but workers are scarce . There is a decline in the demand for labor in the aggregate, due to recessionary tendencies in the economy d. Imperfect information prevents qualified workers from matching up with available jobs 20. The recessionary phase of the business cycle is characterized by a. b. c. d. Reduced output and increased unemployment Reduced output and reduced unemployment Increased output and increased unemployment Increased output and reduced unemploymentExplanation / Answer
12. Rate of inflation = (222 - 200)/200 x 100 = 11 percent
Answer is b) 11 percent
13. b) the cost of living
14. a) the value of GDP deflator will be increasing.
GDP deflator = Nominal GDP / Real GDP
Increase in nominal GDP more than increase in real GDP leads to increase in GDP deflator.
15. d) the purchasing power of the dollars borrowed is greater than the purchasing power of dollars repaid to lenders.
When inflation occurs then value of money declines, now person have to pay more money to buy same units of goods and services. When person borrows money then it has to pay interest on borrowed amount which is not adjusted on inflation. If inflation occurs then value of money falls but borrower will pay the same amount whose value is less today than before. So, person will earn profit.
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