Inflation And Productivity For Economics(Economics ) Questions and answers for exam Preparation

Question 1. According to the Phillips curve unemployment will return to the natural rate when ?

Nominal wages are equal to expected wages
Real wages are back at equilibrium level
Nominal wages are growing faster than inflation
Inflation is higher than the growth of nominal wages

Explanation:-

Answer: Option A. -> Nominal wages are equal to expected wages
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 2. Costs of revaluing the currency

Shift aggregate demand
Shift aggregate supply
Reduce the natural rate of unemployment
Increase the productivity of employees

Explanation:-

Answer: Option B. -> Shift aggregate supply
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 3. Menu costs in relation to inflation refers to ?

Costs of finding better rates of return
Costs of altering price lists
Costs of money increasing its value
Costs of revaluing the currency

Explanation:-

Answer: Option B. -> Costs of altering price lists
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 4. An increase in injections into the economy may lead to ?

An outward shift of aggregate demand- and demand-pull inflation
An outward shift of aggregate demand and cost push inflation
An outward shift of aggregate supply and demand-pull inflation
An outward shift of aggregate supply and cost push inflation

Explanation:-

Answer: Option A. -> An outward shift of aggregate demand- and demand-pull inflation
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 5. If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected ?

neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract
None of these answers
borrowers will gain at the expense of lenders
lenders will gain at the expense of borrowers

Explanation:-

Answer: Option D. -> lenders will gain at the expense of borrowers
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 6. Demand pull inflation may be caused by ?

An increase in costs
A reduction in interest rate
A reduction in government spending
An outward shift in aggregate supply

Explanation:-

Answer: Option B. -> A reduction in interest rate
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 7. Refer to Figure 24-1 What is the value of the basket in the base year ?

Rs459.25
Rs418.75
Rs300
None of these

Explanation:-

Answer: Option C. -> Rs300
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 8. Under which of the following conditions would you prefer to be the lender ?

The nominal rate of interest is 15 percent and the inflation rate is 14 percent
The nominal rate of interest is 20 percent and the inflation rate is 25 percent
The nominal rate of interest is 12 percent and the inflation rate is 9 percent
The nominal rate of interest is 5 percent and the inflation rate are 1 percent

Explanation:-

Answer: Option D. -> The nominal rate of interest is 5 percent and the inflation rate are 1 percent
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 9. Which of the following statements is correct ?

none of these answers
The nominal interest rate is the inflation rate minus the real interest rate
The real interest rate is the nominal interest rate minus the inflation rate
The nominal interest rate is the real interest rate minus the inflation rate

Explanation:-

Answer: Option C. -> The real interest rate is the nominal interest rate minus the inflation rate
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!

Question 10. If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is ?

Explanation:-

Answer: Option A. -> 4 percent
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!