Practice Exam 1- Spring 2012

B both increase 10 percent and output increases 10

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Unformatted text preview: t are hurt because they get less than they expected in real terms. B) creditors with an indexed contract gain because they get more than they contracted for in nominal terms. C) debtors with an unindexed contract do not gain because they pay exactly what they contracted for in nominal terms. D) debtors with an indexed contract are hurt because they pay more than they contracted for in nominal terms. 28. If inflation is 6 percent and a worker receives a 4 percent wage increase, then the worker's real wage: A) increased 4 percent. B) increased 2 percent. C) decreased 2 percent. D) decreased 6 percent. 29. An example of an imputed value included in the GDP is the: A) value- added of meals cooked at home. B) housing services enjoyed by homeowners. C) services of automobiles to their owners. D) value of illegal drugs sold. 30. The one- to- one relation between the inflation rate and the nominal interest rate, the Fisher effect, assumes that the: A) money supply is constant. B) velocity is constant. C) inflation rate is constant. D) real interest rate is constant. 31. Assume that a tire company sells four tires to an automobile company for $400, another company sells a compact disc player for $500, and the automobile company puts all of these items in or on a car that it sells for $20,000. In this case, the amount from these transactions that sh...
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