MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 7, Problem 14SQ
To determine
The correctness of the statements.
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Which of the following are CORRECT statements regarding inflation and real
variables? Select ONLY THOSE THAT APPLY.
Select 2 correct answer(s)
If nominal interest rate is 10 percent, the inflation rate is 5 percent, and the tax rate is 30
percent, the real after-tax interest rate is 2 percent.
Lower than anticipated inflation raises the real wage rate (adjusted for inflation) and workers
gain at the expense of employers who lose.
If the money wage rate is $30.00 an hour and the price level is 120, the real wage rate is
$24.00.
If my nominal wages go up 5% this year and inflation is 2% this year, what happened?
a) All of the choices are correct.
b) I experience an increase in my both my nominal income and in my real income.
c) My nominal wages increased more than the increase in the overall price level.
d) My real wages increased by approximately 3%
Which of the following is wrong?
Select one:
a. Core inflation is the inflation that consumers feel when they buy their core products.
b. Cost-push inflation occurs when factors such as rapid increases in the prices of imported raw materials drive up per-unit production costs at each level of output; higher costs push the price level upward.
c. Demand-pull inflation occurs when total spending exceeds how much goods and services are provided at an exiting price level in an economy.
d. Inflation is a rising general level of prices and is measured as a percentage change in a price index such as the CPI; deflation is a decline in the general level of prices.
Chapter 7 Solutions
MACROECONOMICS FOR TODAY
Ch. 7.2 - Prob. 1GECh. 7.2 - Prob. 2GECh. 7.2 - Prob. 1YTECh. 7.2 - Prob. 2YTECh. 7 - Prob. 1SQPCh. 7 - Prob. 2SQPCh. 7 - Prob. 3SQPCh. 7 - Prob. 4SQPCh. 7 - Prob. 5SQPCh. 7 - Prob. 6SQP
Ch. 7 - Prob. 7SQPCh. 7 - Prob. 8SQPCh. 7 - Prob. 9SQPCh. 7 - Prob. 10SQPCh. 7 - Prob. 11SQPCh. 7 - Prob. 1SQCh. 7 - Prob. 2SQCh. 7 - Prob. 3SQCh. 7 - Prob. 4SQCh. 7 - Prob. 5SQCh. 7 - Prob. 6SQCh. 7 - Prob. 7SQCh. 7 - Prob. 8SQCh. 7 - Prob. 9SQCh. 7 - Prob. 10SQCh. 7 - Prob. 11SQCh. 7 - Prob. 12SQCh. 7 - Prob. 13SQCh. 7 - Prob. 14SQCh. 7 - Prob. 15SQCh. 7 - Prob. 16SQCh. 7 - Prob. 17SQCh. 7 - Prob. 18SQCh. 7 - Prob. 19SQCh. 7 - Prob. 20SQ
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- Which of these is not a factor that causes demand-pull inflation? a. Private consumption b. Population c. Government spending d. Supply side shocksarrow_forward1. Paul and Mary wanted to get married, and they wished to purchase a house for the new family. Therefore, they had arranged a meeting with a banker to know more about the mortgage details. They all expected that inflation will be 3 percent over the borrowing period, and the banker offered them a nominal interest rate of 6 percent. As it turns out, the inflation was 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?arrow_forward1) Whether you gain or lose during a period of inflation depends on: a) how the price increases affect government purchases of goods. b) whether the economy is expanding or contracting. c) whether you save or not. d) whether your income rises faster or slower than prices of the things you buy. 2) A real wage that does not keep pace with inflation implies: a) a decrease in purchasing power. b) a decrease in nominal wages. c) a decrease in nominal wages after inflation. d) an increase in the inflation adjusted real wage.arrow_forward
- Which statement best describes U.S. inflation between 1982 and 2000? A. It was virtually nonexistent. It was consistently high, often climbing into the double digits. B. It was widely variable, swinging from zero to over 10%. C. It was neither very high nor very low.arrow_forwardIf borrowers and lenders anticipate that the rate of inflation will be 5%, but instead it turns out to be 3%, which of the following is likely to occur? Select one: a. The real interest rate is higher than expected. b. Lenders wish that they had made fewer loans. c. Borrowers wish that they had borrowed more money. d. Insufficient loans will have been made by lenders to maintain profit levels.arrow_forwardWhich of the following statements about inflation is true? A. Inflation is not a problem because it is just another way for the government to collect revenue—an alternative to the income tax or the sales tax. B. Inflation is a tax on holding money. C. Inflation occurs when real GDP grows more rapidly than the quantity of money. D. Inflation is a tax on spending money.arrow_forward
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