Finance Exam 3

The statement that informed consumers have a time preference for money means that: b. Consumers would prefer $1,000 now versus $1,000 payable in five years.
Inflation is: a. A sustained increase in the average price level over time.
Which of the following is an example of inflation? b. The price level of many things you buy increases over time.
The purpose of interest payments on savings or on loans is to: c. Cover losses in purchasing power due to inflation, to reward the saver or lender for forgoing current spending, and to reward the lender for taking a risk that the money may not be repaid.
If the government were to implement a law that holds the price of gasoline below the market price, say $2 per gallon, what would the result likely be? c. Shortages of gasoline and long lines.
The inflation rate is the d. Percent change in the price level from an earlier period.
The Great Inflation eventually ended as a result of c. The Federal Reserve increasing interest rates, which led to a sever recession.
Inflation is measured as d. An increase in the price level, as measured by an index, such as the consumer price index (CPI), over a given period.
The Phillips curve expresses the short-run trade-off between c. Inflation and unemployment.
All of the following are costs of inflation, except a. Money neutrality.
The Great Inflation was caused by d. Government policies that increased economic activity and the money supply.
The phrase, a decline in the average price level over a sustained period, describes which of the following terms? a. Deflation
The phrase, a sustained increase in the average level of prices of goods and services in an economy over time, describes which of the following terms? b. Inflation
The Federal Reserve conducts open market operations by b. Buying and selling Treasury securities to influence the federal funds rate.
Inflation is usually caused by c. An increase in the money supply that exceeds the growth in the quantity of goods and services produced in the economy.
In the long run, increasing the money supply d. Increases inflation.
In times of high inflation, the Federal Reserve would likely use open market operations to a. Sell Treasury securities.
The discount rate is the interest rate that c. Banks pay when they take a loan from the Federal Reserve.
Each option below lists the inflation rate for three consecutive years. Which shows disinflation? c. 5 percent, 4 percent, 3 percent.
If the interest rate on a loan is 5 percent and the inflation rate is 3 percent, the real interest rate is b. 2 percent.

Leave a Reply

Your email address will not be published. Required fields are marked *