83. A relative price is:
A. the rate of inflation.
B. a measure of overall prices at a particular point in time.
C. the percentage change in a price index such as the CPI.
D. the price of a specific good in comparison to the prices of other goods and services.
84. A measure of overall prices at a particular point in time is called:
A. a relative price.
B. the price level.
C. a real price.
D. inflation.
85. If the price of motel rooms increases by 10% while the prices of other goods and services increase by 5% on
average, the relative price of motel rooms has:
A. increased.
B. decreased by 5%.
C. decreased by 10%.
D. remained constant.
86. If all prices, including the price of beef, increase by 3%, then the relative price of beef has ______ and inflation
_____.
A. increased; has occurred
B. increased; has not occurred
C. remained constant; has occurred
D. remained constant; has not occurred
87. To counteract relative price changes, the government would implement:
A. monetary policy.
B. fiscal policy.
C. polices that affect the supply and demand for a specific good.
D. policies that affect the supply and demand for all goods and services.
88. A change in the average price level is called _____, while a change in the price of a specific good in comparison
with other goods and services is called _______.
A. a quality adjustment; a substitution bias
B. a change in a relative price; inflation
C. inflation; a change in a relative price
D. a price level adjustment; a quality adjustment
89. Suppose the value of the CPI is 1.100 in year one, 1.122 in year two, and 1.133 in year three. Assume also that
the price of computers increases by 3% between year one and year two, and by another 3% between year two and year three. The price level is increasing, the inflation rate is _______, and the relative price of computers is _________.
A. decreasing; increasing
B. increasing; increasing
C. decreasing; decreasing
D. increasing; decreasing
90. Suppose the value of the CPI is 1.100 in year one, 1.210 in year two, and 1.331 in year three. Assume also that
the price of computers increases by 3% between year one and year two, and by another 3% between year two and year three. The price level is increasing, the inflation rate is _______, and the relative price of computers is _________.
A. increasing; increasing
B. constant; increasing
C. constant; decreasing
D. increasing; decreasing
91. Suppose the value of the CPI is 1.100 in year one, 1.160 in year two, and 1.270 in year three. Assume also that
the price of computers increases by 3% between year one and year two, and by another 3% between year two and year three. The price level is increasing, the inflation rate is _______, and the relative price of computers is _________.
A. increasing; increasing
B. constant; increasing
C. constant; decreasing
D. increasing; decreasing
92. ______ is an increase in the price level, while ______ is an increase in the price of one good in comparison to
other goods and services.
A. Inflation; hyperinflation
B. A relative price increase; inflation
C. Hyperinflation; inflation
D. Inflation; a relative price increase
93. Inflation makes it difficult to distinguish relative price changes from changes in the general level of prices.
Consequently, inflation ______ the efficiency of the market system.
A. increases
B. decreases
C. does not change
D. may either increase or decrease
94. Inflation ______ the signals sent by price changes to demanders and suppliers of goods and services.
A. amplifies
B. obscures
C. enhances
D. has no impact on
95. The phenomenon known as ______ occurs when inflation causes people to pay an increasing percentage of
their income in taxes even when their real incomes have not changed.
A. hyperinflation
B. bracket creep
C. the Fisher effect
D. substitution bias
96. To prevent people paying a higher percentage of their income in taxes even when their real incomes have not
changed, Congress:
A. implemented a flat tax.
B. reduced the capital gains tax.
C. indexed the income tax brackets to the CPI.
D. deflated the income tax brackets to the CPI.
