Question 1

Variable-rate mortgages decrease the risks associated with unexpected inflation.

Accepted Answer

Variable-rate mortgages typically have interest rates that fluctuate with market conditions, meaning that if inflation increases, the interest rate on the mortgage will also increase. This can help borrowers by reducing the risk of being locked into a fixed interest rate that becomes unaffordable in the event of unexpected inflation.

Question 2

Indonesia experienced hyperinflation in the 1990s.

Accepted Answer

The answer of Indonesia experienced hyperinflation in the 1990s....

Question 3

Demand-pull inflation is more likely to occur when the economy is producing at maximum capacity.

Accepted Answer

When the economy is producing at maximum capacity, there is increased demand for goods and services, and suppliers may not be able to meet this demand. This leads to an increase in prices, which results in demand-pull inflation.

Question 4

Inflation is defined as the sustained increase in relative prices.

Accepted Answer

Inflation is defined as the sustained increase in the general level of prices, not just relative prices.

Question 5

The more difficult it is for a firm to adjust its labor force in the face of economic fluctuation, the more likely the firm is to hire new workers.

Accepted Answer

If it is difficult for a firm to adjust its labor force, it is more likely to retain current workers and avoid the costs of hiring and training new ones during economic fluctuation.

Question 6

Rapid increases in military spending by the federal government without accompanying increases in real output could be a cause of cost-push inflation.

Accepted Answer

The answer of Rapid increases in military spending by the...

Question 7

If a student borrowed $5,000 at a fixed rate of 8.9 percent to pay for this year's college expenses and the annual inflation rate turns out to be 11 percent, then the student's purchasing power for the year has increased.

Accepted Answer

The answer of If a student borrowed $5,000 at a...

Question 8

Hyperinflation is usually accompanied by a great macroeconomic expansion.

Accepted Answer

Hyperinflation usually destabilizes economies and negatively affects macroeconomic indicators such as employment, output, and investment.

Question 9

If the average price level in 1991 was 1.20 relative to the base year in 1986, then a dollar in 1991 bought 20 percent more goods and services than a dollar in 1986.

Accepted Answer

The answer of If the average price level in 1991...

Question 10

If the inflation rate for a given year is 5 percent, then $1.00 in the previous year will buy goods worth approximately $0.95 this year.

Accepted Answer

The answer of If the inflation rate for a given...

Quiz 7: Unemployment and Inflation