121.Sophiaputsmoneyinthebankandearnsa5percentnominalinterestrate.Iftheinflationrateis2percent,thenafteroneyear,
a.Sophiawillhave3percentmoremoney,whichwillpurchase5percentmoregoods.
b.Sophiawillhave3percentmoremoney,whichwillpurchase7percentmoregoods.
c.Sophiawillhave5percentmoremoney,whichwillpurchase3percentmoregoods.
d.Sophiawillhave5percentmoremoney,whichwillpurchase7percentmoregoods.
122.Coreydeposits$1,000inasavingsaccountthatpaysanannualinterestrateof5percent.Overthecourseofayear,theinflationrateis1.7percent.Attheendoftheyear,Coreyhas
a.$17moreinhisaccount,andhispurchasingpowerhasincreasedby$10.
b.$30moreinhisaccount,andhispurchasingpowerhasincreasedby$50.
c.$40moreinhisaccount,andhispurchasingpowerhasincreasedby$33.
d.$50moreinhisaccount,andhispurchasingpowerhasincreasedby$33.
123.Rosadeposits$100inabankaccountthatpaysanannualinterestrateof20percent.Ayearlater,afterRosahasaccumulated$20ininterest,shewithdrawsher$120.Rosa’spurchasingpower
a.didnotchangeiftheinflationratewas20percent.
b.decreasediftheinflationratewas-5percent.
c.increasediftheinflationratewas22percent.
d.Morethanoneoftheaboveiscorrect.
124.JakeloanedElwood$5,000foroneyearatanominalinterestrateof10percent.AfterElwoodrepaidtheloaninfull,Jakecomplainedthathecouldbuy4percentfewergoodswiththemoneyElwoodgavehimthanhecouldbeforeheloanedElwoodthe$5,000.Fromthis,wecanconcludethattherateofinflationduringtheyearwas
a.-4percent.
b.4percent.
c.6percent.
d.14percent.
125.Ms.Laneborrowed$1,000fromherbankforoneyearataninterestrateof10percent.Duringthatyear,thepricelevelwentupby15percent.Whichofthefollowingstatementsiscorrect?
a.Ms.Lanewillrepaythebankfewerdollarsthansheinitiallyborrowed.
b.Ms.Lane’srepaymentwillgivethebanklesspurchasingpowerthanitoriginallyloanedher.
c.Ms.Lane’srepaymentwillgivethebankgreaterpurchasingpowerthanitoriginallyloanedher.
d.Ms.Lane’srepaymentwillgivethebankthesamepurchasingpowerthatitoriginallyloanedher.
126.Whichofthefollowingisnotcorrect?
a.TheU.S.economyhasneverexperienceddeflation.
b.Since1965,theU.S.nominalinterestratehasexceededtheU.S.realinterestrate.
c.Since1965,theU.S.economyhasexperiencedrisingconsumerpricesinmostyears.
d.Duringdeflation,therealinterestrateexceedsthenominalinterestrate.
127.Whichofthefollowingiscorrect?
a.Nominalandrealinterestratesalwaysmovetogether.
b.Nominalandrealinterestratesnevermovetogether.
c.Nominalandrealinterestratesdonotalwaysmovetogether.
d.Nominalandrealinterestratesalwaysmoveinoppositedirections.
128.IntheUnitedStatesinthelate1970s,nominalinterestrateswerehighandinflationrateswereveryhigh.Asaresult,realinterestrateswere
a.veryhigh.
b.high.
c.low,butnevernegative.
d.low,andinsomeyearstheywerenegative.
129.IntheUnitedStates,nominalinterestrateswere
a.highinthe1970sand1990s.
b.lowinthe1970sand1990s.
c.high inthe 1970sand lowin the1990s.
d.low inthe 1970sand highin the1990s.
130.IntheUnitedStates,realinterestrateswere
a.highinthe1970sand1990s.
b.lowinthe1970sand1990s.
c.high inthe 1970sand lowin the1990s.
d.low inthe 1970sand highin the1990s.
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