Quiz4 - Name _ PSU ID (last 4) _ Section _ Inflation Quiz...

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Name ______________ PSU ID (last 4) _______ Section ______ Inflation Quiz – Econ 4: DO NOT TURN THIS QUIZ SHEET OVER UNTIL INSTRUCTED TO DO SO – GOOD LUCK!
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Name _____________________ PSU ID ____________________ Date _______ Inflation Quiz – Econ 004 – good luck BE SURE TO DO ALL YOUR WORK ON QUIZ SHEET AND COMPLETE SCANTRON WHEN TOTALLY FINISHED WITH YOUR WORK. FORM A 1. According to the Fisher effect – nominal interest rates and inflation are positively related – that is, they move up together and move down together. 2. If the expected rate of inflation is 4% and the current one year nominal interest rate is 3%, then the real interest rate is 1%. 3. If food and energy prices are rising faster than the prices of the remaining items that make up the consumption basket, then the core rate of inflation will be higher than the overall rate of inflation. 4. The PCE core rate of inflation is based on a chain weighted price index and is the Federal Reserve’s favorite inflationary gauge. Currently, the PCE core rate of inflation lower than the headline CPI rate of inflation (the Bloom rate). 5. We argued that strong demand for US Treasuries (bonds) from foreign central banks has kept interest rates relatively high here in the US. The concern is that if their appetite falls, so will nominal interest rates including the long-term mortgage rate, with the fear being that the US economy may overheat. 6. We argued that the price of a bond and the interest rate on that bond share an inverse or negative relationship. Use the following information to answer the true – false questions below. 2004 Basket for ‘typical college student’
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This note was uploaded on 03/29/2008 for the course ECON 004 taught by Professor Graf,pauledwin during the Spring '07 term at Pennsylvania State University, University Park.

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Quiz4 - Name _ PSU ID (last 4) _ Section _ Inflation Quiz...

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