16. The effects of inflation are seen in A goods and services only B. wages and

Question

16. The effects of inflation are seen in A goods and services only B. wages and income levels only C. services and wages only D. goods, services, wages and income levels 17. The difference between a budget deficit and the national debt is a The national debt represents spending over revenues in the current year b. The deficit represents spending over revenues in the curreat year c. The deficit represents accumulated spending over revenues in all years added together d the national debt represents accumulated spending in excess of revenues in all years added together e. Both b. and d. are correct 18. Unemployment is rising and GDP is decreasing. The economy is: A Entering a recession B. Reaching a peak C. In a trough D. Headed toward a recovery policy will cause a greater share of income to be collected from those with high incomes 19. A than from those with lower incomes A. proportional tax B. regressive tax C. progressive tax D. excise tax 20. The most commonly used measure of price changes in the U.S. economy is a The PCE b. The Consumer Price Index c. the CPI price deflator 21. The discount rate is the rate at which: A. Consamers can take out personal loans from a bank B. The interest rate that credit card companies charge cardholders C. The rate at which banks can make overnight loans from the federal reserve D The rate which borrowers with the best credit rating get on a home mortgage 22. M1 includes: A. checking accounts (demand depoaits) B. currency and coin held in our pockets C. traveler's checks D. All of the above 23. Which best describes the incentives that opected inflation provides to sellers/suppliers in the economy? A) Sellers will want to accept the offer from the lowest bidder B) Sellers will sell less now and wait until prices stabilize before making more purchases. C) Sellers will wait for the offer from the highest bidder D) Sellers will wait until prices fall before selling again 24. You recerve a 4% pay raise this year, at the same time, inflation rises by 6 % this year. A) Your purchasing power has increased B) It is impossible to tell what is happening to your purchasing power without further information C) Your parchasing power has declined D) Your purchasing power is unaffected by either inflation or the pay raise because they are expressed in nominal, and not real, terms

Explanation / Answer

(16) (D)

Effects of inflation are seen in both goods market and factor market prices.

(17) (E)

Budget deficit in year N = (Government spending - Tax revenue) in year N

National debt in year N = Accumulated budget deficit of all previous years up to year N

(18) (A)

During recession, output falls, unemployment rises and real GDP falls.

(19) (C)

With a progressive tax, the higher the income, the higher the marginal and average tax rate.

(20) (B)

(21) (C)

Discount rate is the rate at which Central Bank extends credit to commercial banks.

(22) (C)

NOTE: As per Chegg answering guidelines, first 7 questions are answered.

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