1. Which of the following statements about inflation is correct?

A. A one-time increase in the price of a single good could be considered inflation.

B. Americans won't be satisfied until a goal of 0% inflation is reached.

C. Since 1945, the inflation rate in the United States has been relatively stable. D. None of the statements above are correct.

2 . As a solution to its high inflation, in 2001 Ecuador decided to: A. Print additional currency to finance government expenditures. B. Replace its currency with the U.S. dollar.

C. Reduce the rate of monetary growth.

D. Fix prices.

3. Which of the following statements concerning inflation is correct? A. Inflation does not discriminate; it hurts everyone equally.

B. During inflationary periods, incomes and prices usually tend to increase at the same rate.

C. Inflation may actually benefit some people, particularly those on fixed incomes.

D. All of the above are incorrect statements.

4. Which of the following statements is true about the impact of inflation on the economy?

A. Unanticipated inflation hurts more than anticipated inflation.

B. Higher than expected inflation hurts creditors, but benefits debtors.

C. Inflation creates inefficiency in the economy because it forces people to spend time trying to avoid some of the harm inflicted by inflation.

D. All of the above.

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5. The interest rate stated in a loan contract, or the rate at which you borrow from the bank is:

A. The real rate of interest.

B. The nominal rate of interest minus the rate of inflation. C. The real rate of interest plus the rate of inflation.

D. None of the above.

6. Which of the following is true about the relationship between producer prices and consumer prices?

A. Producer prices increase before consumer prices do.

B. Consumer prices usually increase before producer prices do.

C. Consumer and producer prices usually move in tandem (change simultaneously).

D. There is no clear relationship between the moves of consumer prices and producer prices.

7. Which of the following is an application of the Consumer Price Index (CPI)? A. As an economic indicator.

B. To convert nominal economic values into real values.

C. To adjust selected monetary payments upward as prices increase. D. All of the above.

Essay Questions ( 5-6 Lines)

1. Do you personally gain or lose from inflation? Why?

2. Make a list of those who are most likely to gain and those who are most likely to lose from inflation.

3. Explain why inflation usually accelerates during wartime.