Question :
11) Because the inflation rate so high Wanda refuses to : 1238092
11) Because the inflation rate is so high Wanda refuses to carry cash. Even though it is a bother, she now goes to the ATM twice as often to get the cash she needs. Wanda’s actions are an example of the
A) shoe-leather costs of inflation.
B) tax costs of inflation.
C) confusion costs of inflation.
D) uncertainty costs of inflation.
E) tax distorting costs of inflation.
12) If inflation is making it difficult for people to estimate the true marginal benefits and true marginal costs of activities, inflation is leading to
A) tax costs.
B) shoe-leather costs.
C) confusion costs.
D) uncertainty costs.
E) increased economic growth.
13) Uncertainty costs arise from inflation because inflation makes long-term planning ________ so people respond by ________ investment.
A) more difficult; increasing
B) more difficult; decreasing
C) less difficult; not changing
D) more difficult; not changing
E) less difficult; increasing
14) Inflation is a tax because as the government ________ the quantity of money, the price level ________, and the purchasing power of households’ money ________.
A) increases; rises; increases
B) decreases; falls; decreases
C) increases; rises; decreases
D) decreases; rises; decreases
E) does not change; rises; increases
15) Which of the following is NOT a cost of inflation?
A) tax cost
B) confusion cost
C) uncertainty cost
D) unemployment cost
E) shoe-leather cost
16) Which of the following is NOT a cost of inflation?
A) tax costs
B) confusion costs
C) uncertainty costs
D) government spending costs
E) shoe-leather costs
17) Becky holds $30,000 as money. After a year during which inflation was 5 percent a year, the inflation tax over that year was
A) $500.
B) $1,000.
C) $1,500.
D) $3,000.
E) $5.
18) Suppose a country has a real interest rate of 4 percent and an inflation rate of 3 percent. If the income tax rate is 20 percent, then the after-tax real interest rate is
A) 2.6 percent.
B) 4.0 percent.
C) 5.6 percent.
D) 7.0 percent.
E) 1.4 percent.
19) Shoe-leather costs arise from inflation because the velocity of circulation of money ________ as the inflation rate ________.
A) increases; falls
B) decreases; rises
C) increases; rises
D) does not change; rises
E) does not change; falls
20) A consequence of hyperinflation is that people
A) who make fixed-payment loans to others receive higher payments as inflation increases.
B) spend time trying to keep their money holdings near zero.
C) receive higher real wage hikes, which increases their purchasing power for goods and services.
D) want to lend funds because interest rates are so high.
E) increase the quantity of money demanded.
21) The uncertainty costs of inflation cause people to
A) increase their demand for money.
B) increase investment causing economic growth to decrease.
C) focus on the short run, which decreases investment and slows growth.
D) focus on the long run, which increases investment and speeds growth.
E) incur more shoe leather costs.
22) The uncertainty costs of inflation cause ________ because ________.
A) a decrease in investment and slower growth; people increase their demand for money
B) an increase in investment and faster growth; people decrease their demand for money
C) a decrease in investment and slower growth; people focus on the short run and not the long run
D) a decrease in investment and slower growth; people focus on the long run and not the short run
E) an increase in investment and faster growth; people focus on the short run and not the long run
23) The costs of inflation ________ when inflation is more rapid and ________ when inflation is more unpredictable.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) increase; do not change
E) do not change; increase
24) It is estimated that if the inflation rate is lowered from 3 percent a year to 0 percent a year, the growth rate of real GDP will rise by ________ percentage points a year.
A) 0.06 to 0.09
B) 1 to 3
C) 2.3
D) 3.2
E) 0
