1) A rise in the amount of inflation, given a fixed nominal interest rate will cause: The nominal interest rate to rise B. The nominal interest rate...

1) A rise in the amount of inflation, given a fixed nominal interest rate will cause: 

A.  The nominal interest rate to rise

 B.  The nominal interest rate to fall

 C.  The real interest rate to rise

 D.  The real interest rate to fall

2) In which situation is the real interest rate highest? 

A.  The nominal interest rate is 25% and the inflation rate 30%.

 B.  The nominal interest rate is 2% and the inflation rate 1%.

 C.  The nominal interest rate is 8% and the inflation rate 5%.

 D.  The nominal interest rate is 11% and the inflation rate 9%.

3) CPI and Purchasing Power

Pete puts $100 in a savings account that pays an annual interest rate of 10 per cent. By the end of the year, the CPI has increased from 120 to 130. The purchasing power of Pete's bank account has remained unchanged.  

True

  False

4) Inflation is a problem because it erodes nominal wage growth.  

True

  False

5) The Consumer Price Index measures inflation by using: 

A.  all goods and services that are produced using a base-year basket

 B.  only consumption goods and services purchased using a current-year basket

 C.  all goods and services that are produced using a current-year basket

 D.  only consumption goods and services purchased using a base-yer basket

6) Who among the following would be counted as unemployed in the official government statistics? 

A.  Amber, who is going to school full time and is not interested in working

 B.  Billy, who is working part time while looking for a full-time job

 C.  Chuck, who is 14 and is looking for job delivering papers

 D.  Diane, who has begun to look for work because her daughter has started school