Macro Ch6 Online Questions

# Macro Ch6 Online Questions - Chapter 6 Review Questions 1...

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Chapter 6 Review Questions 1. How does the price level differ from, say, the price of a haircut or a Big Mac? 2. Explain how you might construct an index of bank deposits over time. What steps would be involved? 3. What is the CPI? What does it measure? How can it be used to calculate the inflation rate? 4. Can the inflation rate be decreasing at the same time the price level is rising? Can the inflation rate be increasing at the same time the price level is falling? Explain. 5. What are the main uses of the CPI? Give an example of each use. 6. Explain the logic of the formula that relates real values to nominal values. 7. What are the similarities between the CPI and the GDP price index? What are the differences? 8. What are the costs of inflation? 9. Under what circumstances would inflation redistribute purchasing power? How? When would it not redistribute purchasing power? 10. How is a nominal interest rate different from a real interest rate? Which do you think is the better measure of the rate of return on a loan?

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