12. An increase in the general price level is termed:

a. Inflation

b. Deflation

c. Stagflation

d. Nominal pricing

13. If the consumer price index (CPI) in 1999 was 200 and the CPI in 2000 was 215, the rate of inflation was:

a. 215 percent

b. 15 percent

c. 5 percent

d. 7.5 percent

e. 8 percent

14. Disinflation means a decrease in:

a. the rate of inflation.

b. the general level of prices in the economy.

c. the prices of all products in the economy.

d. the circular flow.

15. Suppose your nominal income this year is 5 percent higher than last year. If the inflation rate for the period was 3 percent, then your real income:

a. increased by 1.67 percent.

b. increased by 2 percent.

c. increased by 8 percent.

d. declined by 0.6 percent.

16. Last year the Olsen family earned $70,000. This year their income is $77,000. In an economy with an inflation rate of 8 percent, we can conclude that the Olsen's nominal income:

a. and real income both increased.

b. and real income both decreased.

c. increased, but their real income decreased.

d. decreased, but their real income increased.

17. Suppose you place $10,000 in a retirement fund that earns a nominal interest rate of 8 percent. If you expect inflation to be 5 percent or lower, then you are expecting to earn a real interest rate of at least:

a. 1.6 percent

b. 3 percent

c. 4 percent

d. 5 percent

18. Cost-push inflation is due to:

a. "too much money chasing too few goods".

b. the economy operating at full employment.

c. increases in production costs.

d. All of the above.

19. Stagflation occurs when the economy experiences:

a. low unemployment and low inflation.

b. high unemployment and rapid inflation.

c. low unemployment and rapid inflation.

d. high unemployment and low inflation.

20. GDP measures the economy's production of:

a. Final goods and services

b. Intermediate goods

c. Consumer goods and services

d. Capital goods

21. If imports rise and exports fall, then:

a. GDP will increase.

b. GDP will decrease.

c. GDP remain unchanged.

d. Net exports will fall.

22. Suppose U.S. nominal GDP was $6,250 billion in 2000 and GDP chain price index is 125.0. Real GDP is:

a. $5,488 billion

b. $5,000 billion

c. $6,740 billion

d. $7,789 billion

23. The period during which real output rises during a business cycle is called:

a. Peak

b. Recession

c. Recovery

d. Trough

24. The unemployment rate measures the percentage of:

a. People in the civilian labor force who are without jobs and actively seeking jobs.

b. The U.S. population that is out of work and actively seeking a job.

c. The civilian noninstitutionalized population that is out of work and actively seeking a job.

d. People over age 21 who are without jobs and actively seeking jobs.

25. Inflation is measured by an increase in:

a. Homes, autos and basic resources.

b. Prices of all products in the economy.

c. The consumer price index (CPI).

d. None of the above.

26. A reduction in the general prices of goods is called:

a. Deflation

b. Disinflation

c. Hyperinflation

d. Cost-push inflation

27. Last year the Jones family earned $40,000. This year their income is $42,000. In an economy with an inflation rate of 3 percent, which of the following is correct?

a. The Jones' nominal income and real income have both fallen.

b. The Jones' nominal income and real income have both risen.

c. The Jones' nominal income has increased and their real income has fallen.

d. The Jones' nominal income has decreased and their real income has risen.

28. What is the best way for the Government to improve GDP?

a. Raise taxes

b. Reduce government spending

c. Lower taxes

d. Increase government spending

e. Both increase government spending and lower taxes

29. Suppose U.S. nominal GDP was $5,250 billion in 2000 and GDP chain price index is 125.0. Real GDP is:

a. $5,488 billion

b. $5,000 billion

c. $6,740 billion

d. $4,200 billion

30. If the consumer price index (CPI) in 1999 was 100 and the CPI in 2000 was 105, the rate of inflation was:

a. 215 percent

b. 15 percent

c. 5 percent

d. 7.5 percent

e. 8 percent