Which of the following groups are typically harmed by unexpected inflation?
a. lenders
b. borrowers
c. pensioners on fixed incomes
d. both (a) and (c).
Question 2Why are creditors harmed by unexpected inflation?
a. Creditors receive lower nominal rates of interest when prices rise.
b. Creditors are paid back with more valuable dollars.
c. Creditors receive higher nominal rates of interest when prices rise.
d. Creditors are paid back money with less spending power than they expected when the money was loaned out.
Question 3During an inflationary period, those most likely to suffer reduced wealth are those who are holding their wealth in:
a. gold.
b. real estate.
c. currency.
d. stocks.
Question 4Deflation exists whenever:
a. the overall price level falls.
b. the overall price level rises.
c. the economy experiences a contraction.
d. the price of a good decreases.
Question 5Inflation exists whenever:
a. the price of a good increases.
b. the price of a good decreases.
c. the economy experiences a contraction.
d. the overall price level is rising.
Question 6Which of the following statements is correct?
a. Technological advances always lead to the permanent displacement of workers.
b. In a growing and dynamic economy, jobs are constantly being destroyed and created.
c. Without unemployment insurance, the average duration of unemployment would likely be longer.
d. If there is a balance between demand and supply in the labor market, frictional employment must equal zero.
Question 7Which of the following statements is incorrect?
a. Demand and supply curves for labor are constantly shifting.
b. The typical unemployment compensation in the United States is one's full salary for up to 26 weeks.
c. Unemployment compensation decreases the opportunity cost of being unemployed to a worker.
d. Unemployment compensation encourages longer job searches, which may lead to a better match between jobs and employees.
Question 8If firms pay employees an efficiency wage:
a. absenteeism would be expected to decrease.
b. turnover would be expected to increase.
c. training costs would likely increase.
d. more shirking on the job is likely to occur.
Question 9If firms offer an efficiency wage:
a. the quantity of labor supplied will exceed the quantity of labor demanded.
b. the quantity of labor demanded will exceed the quantity of labor supplied.
c. the quantity of labor supplied will equal the quantity of labor demanded.
d. absenteeism is expected to increase.
Question 10Offering employees an efficiency wage may:
a. reduce turnover.
b. attract the most productive workers.
c. lead to a reduction in training costs.
d. result in any of the above.