EC201 chapter_7_Quiz Full

Unanticipated answer c diff3 topic inflation skill

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Unformatted text preview: eal return on his money, so they both agree on a 10% interest rate borrows paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 4% $400 next year. In this case, A) Tim is better off. B) Dean will pay $56 a year from now on. C) Dean is better off. D) Tim will receive more than 10% of real rate of return a year from now. Answer: C Diff: 2 Topic: Inflation Skill: Analytic AACSB: Analytic Skills 49) Which of the following is a cost of anticipated inflation? A) Debtors are made worse off. B) If people are not fully informed about the price level changes, resources will be misallocated. C) The degree of risk associated with investments in the economy increases. D) Creditors are made worse off. Answer: B Diff: 2 Topic: Inflation Skill: Conceptual AACSB: Reflective Thinking 50) Stopping inflation A) can only benefit the economy, because the price level will be reduced. B) may be costly, if the inflation is stopped by inducing a recession. C) may be costly, but the benefits of stopping inflation will always outweigh the costs of such actions. D) will have no benefits or costs ass...
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