Who is hurt by unanticipated inflation?

Lenders (people who lend money at fixed interest rates) People with fixed incomes Savers

Above 16 years old Able/willing to work Not institutionalized (jail/hospital) Not in military, in school full-time, or retired

Borrowers (people who borrow money) A business where the price of the product increases faster than the price of resources

Which of the following will most likely occur during the expansionary phase of the business cycle?

Real GDP rises and unemployment falls

Real GDP declines and inflation rises

Real GDP rises and unemployment rises

Interest rates rise and the number of business failures rise

If the consumer price index (CPI) were 131 at year end 1999 and 125 at year-end 1998, then inflation during 1999 was

zero, prices were stable in 1999

GDP declines during a(n)

contraction of the business cycle

expansion of the business cycle

Economic recovery begins--

at the end of a recession (trough)

If you live on a fixed income, how will you be affected by inflation.

You are hurt because your purchasing power has decreased.

You are helped because your purchasing power has increased.

You are helped because interest rates rise.

You are hurt because interest rates rise.

What causes cost push inflation

A rise in production costs passed on to consumers

An increase in demand for goods and services

Do you remember the accurate formula of Inflation Rate (%)?

CPI Current Year - CPI Previous Year x 100% CPI Previous Year

CPI Current Year - CPI Previous Year x 100% CPI Current Year

CPI Previous Year - CPI Current Year x 100% CPI Current Year

CPI Previous Year - CPI Current Year x 100% CPI Previous Year

Nominal Interest Rate - Expected Inflation

Nominal Interest Rate / Expected Inflation

Expected Inflation - Nominal Interest Rate

(Nominal GDP / GDP Deflator) x 100

((Current GDP - Previous GDP) / Previous GDP) x 100

( Current GDP / Previous GDP ) x 100

On the Business Cycle, the output gap is measured by which of the following?

The difference between actual and potential GDP.

The difference between nominal and real GDP.

The difference between the actual rate of unemployment and the natural rate of unemployment.

Which of the following describes a difference between nominal gross domestic product (nGDP) and real GDP (rGDP)?

Nominal GDP uses current prices to measure the value of final output, while real GDP uses constant prices.

Nominal GDP uses constant prices to measure the value of final output, while real GDP uses current prices.

Nominal GDP takes into account the size of the population while real GDP does not.

Which of the following will happen when the actual inflation rate exceeds the expected inflation rate?

This will harm lenders with fixed-interest rate loans.

This will benefit lenders with fixed-interest rate loans.

This will harm borrowers with fixed-interest rate loans.

Last year, Myron purchased a $10,000 certificate of deposit with a 3% rate of interest from his bank. The government reported that prices, on average, have fallen by 5% during the current year. Which of the following can be concluded as a result of this transaction?

Myron gains, while the bank loses.

Myron loses, while the bank gains.

Both Myron and the bank equally gain.

Suppose the consumer price index (CPI) was 100 on January 1st, 2017 and 110 on January 1st, 2018 with no changes in nominal wages. Which of the following is definitely true about the economy between January of 2017 and January of 2018?

The inflation rate was 10 percent.

The inflation rate was −10 percent.

Real wages increased by 10 percent.

The point at which a recovery period slows down and begins to move into a recession.

Someone who wants more hours but can’t get them but is still considered employed.

Period of economic downturn when output and employment are falling.

The point at which a recession begins to improve and move into a period of recovery.

Period of economic upturn when output and employment are rising.