mid1 - ECO 181 Mid-term Exam (Version 1) Question 1 If the...

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ECO 181 Mid-term Exam (Version 1) Question 1 If the Consumer Price Index (CPI) overstates the true rate of inflation, the use of the CPI to adjust nominal incomes results in A. understating gains in real incomes. B. overstating gains in real incomes. C. an accurate statement of gains in real incomes. D. nominal values equaling real values. E. an arbitrary redistribution of income. Question 2 If, in a given period, the rate of inflation turns out to be lower than lenders and borrowers anticipated, the effect is that A. the real payments by the borrowers will be lower than expected. B. the nominal income of lenders will be higher than expected, but their real income will be lower than expected. C. the nominal income of the lenders will be as expected, but their real income will be higher than expected. D. both the nominal and real income of lenders will be higher than expected. E. the real income of lenders will be higher than expected, but their nominal income will be lower than expected. Question 3 The CPI for a given year measures the cost of living in that year relative to A. what it was in the base year. B. what it was in the previous year. C. the cost of the basic goods and services need to sustain a typical household. D. the amount spent on goods and services by the randomly selected families in the Consumer Expenditure Survey. E. the cost of the basic goods and services in the base year. Question 4 If the Consumer Price Index is 135 at the end of 2001 and, at the end of 2002, it is 142, then during 2002 the economy experienced A. deflation. B. inflation. C. hyperinflation. D. indexing. E. deflating. Question 5 If on the day you were born, your parents deposited $1,000 into a saving account that would earn an annual compound interest rate of 5 percent, what would the value of the account be on your 20 th birthday? 1
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A. $1,100.00 B. $2,653.30 C. $3,325,256.73 D. $1,500.00 E. $1,050.00 Question 6 The faster the rate of technological change, the A. lower the rate of growth in productivity. B. lower the rate of economic growth.
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mid1 - ECO 181 Mid-term Exam (Version 1) Question 1 If the...

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