Question 1

People are interested in how much their money can buy.This is called the ________.

Accepted Answer

The answer of People are interested in how much their...

Question 2

If the price level falls faster than the wage rate,then the real wage decreases.

Accepted Answer

If the price level falls faster than the wage rate, then the real wage increases, as the worker's purchasing power for goods and services is higher. Thus, the statement in the question is incorrect.

Question 3

Suppose you earn $50,000 per year in 2015.If your income increases by 8 percent while inflation increases by 10% in 2016,then calculate how much your real income has increased between 2015 and 2016.

Accepted Answer

The answer of Suppose you earn $50,000 per year in...

Question 4

If the weekly income from 1974 to 2015 increased from $80 to $290,but the number of standard baskets of goods that the weekly income could purchase decreased from 1.70 to 1.23 from 1974 to 2015,then we can conclude that

Accepted Answer

The increase in weekly income from $80 to $290 is a significant increase by 362.5%. However, the decrease in the number of standard baskets of goods that the weekly income could purchase from 1.70 to 1.23 shows that prices have also increased significantly. The decrease in the purchasing power of the weekly income indicates that prices have increased faster than the wage increase. Therefore, the best choice is B.

Question 5

What is the real value of money?

Accepted Answer

The real value of money is determined by the quantity of goods and services it can buy. The face value of money may not accurately reflect its true purchasing power due to inflation or changes in the economy. The compounded earnings in banks may increase the nominal value of money, but it doesn't reflect the real value that it can buy. The amount of money one has may also not reflect its real value since someone with a small amount of money can potentially buy more than someone with a large amount of money, depending on the cost of goods and services.

Question 6

The weekly income earned in 2015 could buy ________ standard baskets of goods and services.

Accepted Answer

The correct answer is A because the weekly income earned in 2015 could buy 1.23 standard baskets of goods and services.

Question 7

What matters to people is the face value of money or income.

Accepted Answer

What truly matters to people is the purchasing power of their money or income, which determines how much they can buy with it, rather than just the face value.

Question 8

If the nominal minimum wage is unchanged while prices rise,then the real minimum wage

Accepted Answer

The real minimum wage is the purchasing power of the minimum wage. If prices rise and the nominal minimum wage remains the same, then the real minimum wage declines because the minimum wage can buy fewer goods and services than before.

Question 9

If your salary increases and the cost of goods in stores increase at the same rate,does a unit of money have more or less buying power?

Accepted Answer

The answer of If your salary increases and the cost...

Question 10

What is the nominal value of money?

Accepted Answer

Nominal value of money refers to its face or stated value, regardless of its purchasing power or actual value in the marketplace. For example, a $20 bill has a nominal value of $20, regardless of whether it can buy more or less than $20 worth of goods and services due to inflation or other economic factors.

Question 11

The government uses the buying power of wages rather than face value or nominal value in reporting changes in "real wages" in the economy.

Accepted Answer

Real wages take into account the buying power of wages, so in reporting changes in real wages, the government uses measures such as the Consumer Price Index (CPI) to adjust for changes in the cost of living. This allows for a more accurate representation of the changes in the actual purchasing power of workers' wages over time.

Question 12

If the nominal minimum wage is unchanged while prices fall,then the real minimum wage

Accepted Answer

If the nominal minimum wage is unchanged while prices fall, then the purchasing power of the wage increases, leading to an increase in the real value of the minimum wage. This means that the real minimum wage increases even though the nominal minimum wage stays the same.

Question 13

Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans to answer the following question(s).
-According to the Application,if you are a debtor who owes student loans,you are helped in paying back your student loans by

Accepted Answer

Unexpected inflation helps debtors, including those with student loans, because it reduces the real value of the money they owe. This means that while the nominal amount of the debt remains the same, the actual purchasing power of the money they repay is less than it was at the time they borrowed it.

Question 14

Is it possible for nominal wages to decrease while real wages increase?

Accepted Answer

The answer of Is it possible for nominal wages to...

Question 15

From 1974 to 2015,as the nominal minimum wage rose from $2 to $7.25,the real value of the minimum wage fell.

Accepted Answer

Inflation over the years has eroded the purchasing power of the minimum wage, causing a decline in its real value despite the nominal increase in its amount.

Question 16

The weekly income earned in 1974 could buy ________ standard baskets of goods and services.

Accepted Answer

The answer of The weekly income earned in 1974 could...

Question 17

Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans to answer the following question(s).
-The Application shows that high inflation results in fewer years to pay back student loans because

Accepted Answer

The answer of Recall the Application about the impact inflation...

Question 18

When prices rise,increases in real income are greater than increases in nominal income.

Accepted Answer

When prices rise, increases in nominal income are not adjusted for inflation and therefore do not accurately reflect changes in purchasing power. Real income, on the other hand, is adjusted for inflation and reflects the true increase in purchasing power. Therefore, increases in nominal income may be offset by inflation, resulting in a smaller increase in real income.

Question 19

What does an increase in prices in retails stores do to the real value of the money you earn as wages?

Accepted Answer

The answer of What does an increase in prices in...

Quiz 2: The Key Principles of Economics