1. If inflation falls from 5% to 3% to 1.3% it is sometimes called A. deflation

ID: 1168501 • Letter: 1

Question

1. If inflation falls from 5% to 3% to 1.3% it is sometimes called

A. deflation

B. disinflation

C. reinflation

D. postinflation

2. Typically the government:

A. overestimates unemployment and underestimates inflation.

B. overestimates both unemployment and inflation.

C. underestimates both unemployment and inflation.

D. understates unemployment and overestimates inflation.

3. True or False

Inflation caused by people’s expectations of inflation is called self-fulfilling inflation.

4. The _____ the unemployment rate and the _____ the rate of inflation, the higher the misery index.

A. lower, higher

B. lower, lower

C. higher, lower

D. higher, higher

5. If the nominal rate of interest is 8 percent and the inflation rate is 3 percent, then the real rate of interest is:

A. 8%

B. 5%

C. 13%

D. 3%

6. True of False

The unemployment rate is the percent of the population without a job.

1). B (disinflation)

2). C. (underestimates both unemployment and inflation.)

3). True. Inflation caused by people’s expectations of inflation is called self-fulfilling inflation.

4). C. (higher, lower)

5). B. (5%)

6). False

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