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Chapter 08
Inflation
True / False Questions
1. The average price level measures how much it costs to buy a market basket of
common goods and services.
True False
2. The phrase "owners' equivalent rent of primary residence" means the cost of
housing services for one year.
True False
3. The BLS has chosen 90 to represent the average 1982-1984 price level, and it
now measures all other years relative to this base year.
True False
4. The CPI measures the changes of one category of products.
True False
5. The inflation rate is the annual percentage change in the average price level.
True False
6. Core inflation includes energy and food cost increases.
True False
7. The biggest declines in prices in the last few years have come from medical care.
True False
8. Nominal increases take into account inflation adjustments over a period of time.
True False
9. Real dollars are also called inflation-adjusted dollars.
True False
10. The inflation-adjusted percentage change is the nominal percentage change plus
the inflation rate.
True False
Multiple Choice Questions
11. Inflation can be defined as
A. an overall increase in prices.

B. a decline in prices.
C. a basic component of market balance.
D. the situation that exists when exports exceed imports.
12. Inflation is
A. one of the key measures in the GDP.

B. one of the key measures of the health of an economy.
C. generally steady from year to year.
D. generally beneficial to countries.
13. The average price level is equivalent to
A. the price of a single good.

B. the price of a market basket of goods.
C. the price of exports.
D. the price of imports.
14. What is the CPI?
A. The Consumer Price Institute.

B. The consumer price index.
C. The consumer product index.
D. The consumer protection index.
15. In order to create an index for consumer prices, the BLS chose
A. 100 to represent the average 1982-1984 price level.

B. 50 to represent the average 1982-1984 price level.
C. 100 to represent the average 1972-1974 price level.
D. 100 to represent the average 1992-1994 price level.
16. Core inflation is defined as
A. inflation that takes energy and food into account.

B. inflation that does not take energy and food into account.
C. inflation that takes health care and energy into account.
D. inflation that does not take health care and energy into account.
17. A relative price shift occurs when
A. the inflation rate of a good or service remains unchanged.

B. the inflation rate of a good or service is significantly higher or lower than the
overall inflation rate.
C. the inflation rate of a good or service matches the overall inflation rate.
D. inflation exceeds the average revenue per capita.
18. Between 2000 and 2010, which of the following experienced a negative inflation
rate?
A. Gasoline
B. College tuition.
C. Medical care.
D. Wireless phone service.
19. Some goods have become less expensive due to
A. globalization and technology.

B. government deregulation.
C. government regulation.
D. GDP growth.
20. Money illusion occurs when we compare dollar amounts
A. without adjusting for technology.

B. without adjusting for inflation.
C. between two years.
D. between the CPI and the GDP.
21. An dollar-amount increase that has not been adjusted for inflation is called
A. a real increase.
B. a nominal increase.
C. a net increase.
D. a inflationary increase.
22. The formula for a real percentage change is
A. the nominal percentage change minus the inflation rate.

B. the nominal percentage change divided by the inflation rate.
C. the nominal percentage change plus the inflation rate.
D. the nominal percentage change multiplied by the inflation rate.
23. Expected inflation is
A. the inflation rate that governments require from year to year.

B. the inflation rate that consumers and businesses expect will hold for some time
in the future.
C. the inflation rate that is based on GDP growth.
D. the inflation rate minus the actual growth rate.
24. Hyperinflation is
A. a moderate increase in prices from year to year.

B. a very rapid increase in prices from year to year.
C. inflation calculated using new technology.
D. inflation calculated based on the CPI model.
25. A wage-price spiral occurs when
A. businesses boost prices and wages to try to stay ahead of higher-than-

expected inflation.
B. businesses reduce prices and wages to try to stay ahead of higher-than-
expected deflation.
C. businesses boost production to try to stay ahead of higher-than-expected
inflation.
D. businesses reduce production to try to stay ahead of higher-than-expected
inflation.
26. The Bureau of Labor Statistics has chosen the price level from __________ to be
the base price level used in calculating the CPI.
A. 1992
B. 1982-1984
C. 2000-2005
D. 1995
27. Unexpectedly high inflation tends to hurt _______ most.
A. borrowers
B. lenders
C. policy makers
D. businesses
28. What is deflation?
A. An increase in the price level that reduces the GDP.

B. A decrease in the price level.
C. A decrease in the rate of inflation.
D. A reduction in GDP caused by changes in the price level.
29. Disinflation is
A. a decrease in prices.
B. a decrease in inflation rates.
C. an increase in prices.
D. an increase in inflation rates.
30. If unexpected inflation is good for borrowers, unexpected deflation is good for
A. borrowers, too.
B. lenders.
C. businesses.
D. governments.
31. Which is NOT a category of goods included in the BLS's consumer market
basket?
A. Communication.
B. New vehicles.
C. Medical care.
D. Business office supplies.
32. What does the phrase "owners' equivalent rent" mean?
A. It is the price of five years' worth of housing services.

B. It is the price of a home.
C. It is the value of a year's worth of housing services.
D. It is the value of three years' worth of housing services.
33. Which goods did NOT decrease in price between 2000 and 2010?
A. Personal computers and peripherals.

B. Alcoholic beverages away from home.
C. Televisions.
D. New vehicles.
34. If an auto manufacturer installs antilock brakes on a vehicle, and that alone
causes the price to increase by $100, the BLS
A. counts that increase as part of the inflation rate.

B. does not count that increase as part of the inflation rate.
C. subtracts that price increase from the overall inflation rate.
D. counts only $50 of the price increase as part of the inflation rate.
35. A new iPod with 30 new features costs $100 more to produce and buy than does
the previous version. The $100 price increase
A. is added to the inflation rate.

B. is not added to the inflation rate because consumer electronics are not part of
the inflation rate.
C. is not added to the inflation rate because it represents an improvement in
quality.
D. is divided by the additional benefits and then added to the inflation rate.
36. A pure price change occurs
A. when inflation increases the price of an item.

B. when technology and quality improve an item.
C. when inflation exceeds expected inflation rates.
D. with unanticipated inflation.
37. As of 2009, the average household earned $49,777. In 1979, the average
household earned $16,461. Although it appears as though incomes have tripled,
other prices have risen too. This illustrates a concept known as
A. deflation.
B. disinflation.
C. money illusion.
D. COLA.
38. Of the categories of spending listed below, which is the smallest component of
the market basket?
A. Food at home.
B. Medical care.
C. Apparel.
D. Education.
A. anticipating inflation over 2% from year to year.

B. the amount of inflation that households and businesses expect will continue
into the future.
C. the opposite of disinflation.
D. based on inflation-adjusted averages year to year.
40. As an example of hyperinflation, one U.S. dollar was equal to _________ German
marks in 1923, compared to 8.9 marks in 1919.
A. 0.001
B. 1
C. 1,000
D. 1 trillion
41. Annual inflation equal to 1,000% means that prices are rising by
A. 100 times in a year.

B. 10 times in a year.
C. 500 times in a year.
D. 1,000 times in a year.
42. In 1973, the oil embargo sparked a wage-price spiral due to higher energy costs.
In 2004, with a similar spike in oil prices, there was not a corresponding wage-
price spiral. The cause of this was
A. Heavy government regulation.

B. Alternative energy sources.
C. Competition from overseas keeping a lid on wages and prices.
D. Unanticipated inflation.
43. What is the cost of transactions as it relates to the harm caused by inflation?
A. The cost associated with the time and effort of managing your spending.
B. The cost of the products whose prices are rising.
C. Production costs plus profit.
D. The cost of the BLS market basket.
44. COLA provisions automatically increase wages or benefits to match
A. inflation.
B. disinflation.
C. deflation.
D. the cost of living.
45. Which of the following countries has not experienced hyperinflation?
A. Norway.
B. Brazil.
C. Germany.
D. Bolivia.
46. In the United States, inflation peaked around
A. 1980.
B. 1982-1984.
C. 1929.
D. 1973.
47. Money illusion occurs
A. at a magic show.
B. when money disappears.
C. when we disregard inflation adjustments for dollar values.
D. when prices decrease.
48. Disinflation and deflation are
A. two different terms that describe the same thing.

B. often confused with each other.
C. exact opposites.
D. terms used to describe changes to the GDP.
49. Certain behavior associated with expected inflation can
A. reduce inflation rates overall.

B. allow lenders to collect with more valuable dollars.
C. allow borrowers to pay with more valuable dollars.
D. actually increase the overall rate of inflation.
50. Unexpected inflation can often
A. reduce price levels below cost.

B. reduce wages below the inflation rate.
C. help borrowers by allowing them to pay back lenders with less valuable dollars.
D. help lenders collect payments in more valuable dollars.
51. The category of spending called "food away from home" makes up a smaller
proportion of the market basket than which of the following categories?
A. Medical care.
B. Gasoline.
C. Education.
D. Food at home.
52. Suppose a technological advancement makes automobiles 50% safer, and at the
same time, the prices of automobiles go up by 25%. No other prices in the
economy changed. Did the relative price of automobiles rise or fall?
A. It depends on whether the safety improvements raise the cost of producing

automobiles by more than, less than, or exactly 25%.
B. The relative price of automobiles rose because the price went up by 25% when
other prices did not rise.
C. The relative price of automobiles fell because the price increased by 25% but
the safety increased by 50%.
D. It depends on whether consumers demand safer cars.
53. Which of the following is an example of a company "offshoring" part of the

production of a service?
A. Scissors for haircuts being produced in China.

B. Technicians overseas reading X-rays taken in the United States.
C. An American traveler getting a tattoo while in Germany.
D. Foreign students studying at American universities.
54.
Refer to Table 8.1, which gives hypothetical data on price changes for three
goods. If the overall rate of inflation in the economy was 3.5%, which good(s)
experienced a relative price increase?
A. Amusement park tickets only.

B. Amusement park tickets and bowling balls.
C. Camouflage neckties only.
D. All three goods experienced relative price increases.
55.
goods. At which of the following overall rates of inflation would it be true that
bowling balls became relatively cheaper?
A. 4.5%.
B. 4.2%.
C. 3.5%.
D. -1.5%.
56.
goods. Which good(s) became relatively more expensive for buyers?

B. None of the goods became relatively more expensive.
C. It depends on the overall rate of inflation in the economy.
D. All three goods became relatively more expensive.
57.
goods. If the overall rate of inflation in the economy was 3.5%, what happened to
the real price of amusement park tickets?
A. The real price of amusement park tickets rose by 1.5%.

B. The real price of amusement park tickets rose by 8.5%.
C. The real price of amusement park tickets rose by 5.0%
D. The real price of amusement park tickets fell by 1.5%.
58.
goods. If the overall rate of inflation in the economy was 4.5%, which of the
following statements is true?
A. The real price of all three goods increased.

B. The real price of amusement park tickets rose, and the real price of bowling
balls and camouflage neckties fell.
C. The real price of amusement park tickets fell, and the real price of bowling
balls and camouflage neckties rose.
D. The real price of all three goods decreased.
59.
goods. If the overall rate of inflation in the economy was 3.5%, what happened to
the real price of camouflage neckties?
A. The real price of camouflage neckties fell by 0.4%.

B. The real price of camouflage neckties rose by 0.4%.
C. The real price of camouflage neckties rose by 6.6%.
D. The real price of camouflage neckties fell by 6.6%.
60.
Refer to Table 8.2. From 2006 to 2010, Antonio received a total of $0.65 in pay
raises, and the CPI also increased as shown in the table. What was Antonio's real
wage in 2006, if 2010 is used as the base year?
A. $8.40.
B. $9.05.
C. $9.09.
D. $8.37.
61.
A. $8.40.
B. $9.05.
C. $9.09.
D. $8.37.
62.
A. $8.40.
B. $9.05.
C. $9.09.
D. $8.37.
63.
raises, and the CPI also increased as shown in the table. What happened to
Antonio's real wage from 2006 to 2010?
A. It rose because $9.05 is greater than $8.40.

B. It rose because Antonio's nominal wage and the CPI were both higher in 2010
than in 2006.
C. It fell because Antonio's nominal wage rose more slowly than did the CPI.
D. It fell because the change in the CPI was 16.5, which is greater than Antonio's
wage.
Short Answer Questions

64. Why does core inflation not include energy or food prices?
65. Explain how globalization has caused some goods to be cheaper.
66. What is a pure price change?

67. What is one way to avoid money illusion?
68. Federal spending on elementary and secondary education rose from $39.7 billion
to $40 billion in 2007. Inflation at the time was 2.5%. Explain what happened to
real spending on education in 2007.
Chapter 08 Inflation Answer Key
True / False Questions
1. The average price level measures how much it costs to buy a market basket of
TRUE
The average price level measures how much it costs to buy a market basket of
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 08-01 Define inflation and calculate the inflation rate using the consumer price index (CPI).
2. The phrase "owners' equivalent rent of primary residence" means the cost of
housing services for one year.
TRUE
See "How it Works: Measuring the Price of Housing."
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
3. The BLS has chosen 90 to represent the average 1982-1984 price level, and it
now measures all other years relative to this base year.
FALSE
The BLS chose 100 to represent the average 1982-1984 price level.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
4. The CPI measures the changes of one category of products.
FALSE
The CPI measures the changes of a variety of consumer products and

services.
AACSB: Reflective Thinking

Blooms: Remember
5. The inflation rate is the annual percentage change in the average price level.
TRUE
See the definition of the inflation rate.

Blooms: Understand
6. Core inflation includes energy and food cost increases.
FALSE
Core inflation does not include energy and food cost increases.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
7. The biggest declines in prices in the last few years have come from medical
care.
FALSE
The biggest declines in prices have come in the technology area.

Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Explain the difference between relative price shifts and the overall inflation rate.
8. Nominal increases take into account inflation adjustments over a period of

time.
FALSE
Real changes take into account inflation; nominal changes do not.
AACSB: Analytic
Blooms: Remember
Learning Objective: 08-03 Calculate and show how incomes and wages can be adjusted for inflation.
9. Real dollars are also called inflation-adjusted dollars.
TRUE
Economists use the term "real" to mean "inflation-adjusted."

Blooms: Understand
10. The inflation-adjusted percentage change is the nominal percentage change
plus the inflation rate.
FALSE
The inflation-adjusted percentage change is the nominal percentage change

minus the inflation rate.
AACSB: Analytic
Blooms: Remember
Multiple Choice Questions
11. Inflation can be defined as
A. an overall increase in prices.

B. a decline in prices.
C. a basic component of market balance.
D. the situation that exists when exports exceed imports.
Inflation is an overall increase in prices.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
12. Inflation is
A. one of the key measures in the GDP.

B. one of the key measures of the health of an economy.
C. generally steady from year to year.
D. generally beneficial to countries.
A main goal of policy makers around the world is to keep inflation under control
because if prices rise too fast it can be bad for consumers and businesses.

Blooms: Understand
13. The average price level is equivalent to
A. the price of a single good.

B. the price of a market basket of goods.
C. the price of exports.
D. the price of imports.
The average price level is the price of a market basket of goods, which the BLS
uses to determine the inflation rate.
AACSB: Analytic
Blooms: Understand
14. What is the CPI?
A. The Consumer Price Institute.

B. The consumer price index.
C. The consumer product index.
D. The consumer protection index.
The CPI measures the cost of a market basket of consumer goods from period
to period.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
15. In order to create an index for consumer prices, the BLS chose
A. 100 to represent the average 1982-1984 price level.

B. 50 to represent the average 1982-1984 price level.
C. 100 to represent the average 1972-1974 price level.
D. 100 to represent the average 1992-1994 price level.
The average price level is measured as a comparison to the 1982-1984 base

price level, which is indexed to 100.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
16. Core inflation is defined as
A. inflation that takes energy and food into account.

B. inflation that does not take energy and food into account.
C. inflation that takes health care and energy into account.
D. inflation that does not take health care and energy into account.
Core inflation does not take energy and food into account.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
17. A relative price shift occurs when
A. the inflation rate of a good or service remains unchanged.

B. the inflation rate of a good or service is significantly higher or lower than the
overall inflation rate.
C. the inflation rate of a good or service matches the overall inflation rate.
D. inflation exceeds the average revenue per capita.
A relative price shift occurs when the inflation rate of a good or service is
significantly higher or lower than the overall inflation rate.

Blooms: Understand
Difficulty: 1 Easy
18. Between 2000 and 2010, which of the following experienced a negative
inflation rate?
A. Gasoline
B. College tuition.
C. Medical care.
D. Wireless phone service.
Wireless phone service experienced a -2.0% inflation rate during the 2000-
2010 period.
AACSB: Analytic
Blooms: Remember
19. Some goods have become less expensive due to
A. globalization and technology.

B. government deregulation.
C. government regulation.
D. GDP growth.
Globalization and technology have allowed the increased use of outsourcing,

reducing the costs of goods and services.
AACSB: Analytic
Blooms: Remember
20. Money illusion occurs when we compare dollar amounts
A. without adjusting for technology.

B. without adjusting for inflation.
C. between two years.
D. between the CPI and the GDP.
We can avoid money illusion by adjusting nominal values for inflation.

Blooms: Understand
21. An dollar-amount increase that has not been adjusted for inflation is called
A. a real increase.
B. a nominal increase.
C. a net increase.
D. a inflationary increase.
Economists use the word "nominal" to describe things measured without taking
inflation into account and the word "real" to describe things measured with
inflation taken into account.

Blooms: Remember
22. The formula for a real percentage change is
A. the nominal percentage change minus the inflation rate.

B. the nominal percentage change divided by the inflation rate.
C. the nominal percentage change plus the inflation rate.
D. the nominal percentage change multiplied by the inflation rate.
The change in the money value after removing the effects of inflation.

Blooms: Understand
Difficulty: 3 Hard
A. the inflation rate that governments require from year to year.

B. the inflation rate that consumers and businesses expect will hold for some
time in the future.
C. the inflation rate that is based on GDP growth.
D. the inflation rate minus the actual growth rate.
Expected inflation is the inflation rate that consumers and businesses expect
will happen over the next year or longer.

Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 08-04 Discuss the impact of unexpected and expected inflation.
24. Hyperinflation is
A. a moderate increase in prices from year to year.

B. a very rapid increase in prices from year to year.
C. inflation calculated using new technology.
D. inflation calculated based on the CPI model.
Hyperinflation is a very rapid increase in the average price level.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
25. A wage-price spiral occurs when
A. businesses boost prices and wages to try to stay ahead of higher-than-

expected inflation.
B. businesses reduce prices and wages to try to stay ahead of higher-than-
expected deflation.
C. businesses boost production to try to stay ahead of higher-than-expected
inflation.
D. businesses reduce production to try to stay ahead of higher-than-expected
inflation.
Wage-price spiral occurs when businesses boost prices and wages to try to
stay ahead of higher-than-expected inflation.

Blooms: Understand
26. The Bureau of Labor Statistics has chosen the price level from __________ to
be the base price level used in calculating the CPI.
A. 1992
B. 1982-1984
C. 2000-2005
D. 1995
The average price level from 1982-1984 is indexed to 100, and all price levels
are compared to this base price level.
AACSB: Analytic
Blooms: Remember
27. Unexpectedly high inflation tends to hurt _______ most.
A. borrowers
B. lenders
C. policy makers
D. businesses
With unexpected inflation, a lender receives repayment with dollars that are
less valuable due to the inflation.
AACSB: Analytic
Blooms: Remember
28. What is deflation?
A. An increase in the price level that reduces the GDP.

B. A decrease in the price level.
C. A decrease in the rate of inflation.
D. A reduction in GDP caused by changes in the price level.
Deflation. Is a decrease in the price level.

Blooms: Understand
Difficulty: 1 Easy
29. Disinflation is
A. a decrease in prices.
B. a decrease in inflation rates.
C. an increase in prices.
D. an increase in inflation rates.
Disinflation is a decrease in inflation rates. It is different from deflation.
AACSB: Analytic
Blooms: Remember
30. If unexpected inflation is good for borrowers, unexpected deflation is good for
A. borrowers, too.
B. lenders.
C. businesses.
D. governments.
Because loans are paid back with more valuable dollars, lenders would benefit
from deflation.

Blooms: Understand
31. Which is NOT a category of goods included in the BLS's consumer market
basket?
A. Communication.
B. New vehicles.
C. Medical care.
D. Business office supplies.
See Table 8.1 in the textbook.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
32. What does the phrase "owners' equivalent rent" mean?
A. It is the price of five years' worth of housing services.

B. It is the price of a home.
C. It is the value of a year's worth of housing services.
D. It is the value of three years' worth of housing services.
See "How it Works: Measuring the Price of Housing."

Blooms: Remember
Difficulty: 1 Easy
33. Which goods did NOT decrease in price between 2000 and 2010?
A. Personal computers and peripherals.

B. Alcoholic beverages away from home.
C. Televisions.
D. New vehicles.
Alcoholic beverages away from home had an average annual inflation rate of
3.5% from 2000 to 2010.
AACSB: Analytic
Blooms: Remember
34. If an auto manufacturer installs antilock brakes on a vehicle, and that alone
causes the price to increase by $100, the BLS
A. counts that increase as part of the inflation rate.

B. does not count that increase as part of the inflation rate.
C. subtracts that price increase from the overall inflation rate.
D. counts only $50 of the price increase as part of the inflation rate.
Improvements in quality are not added to the inflation rate by the BLS.

Blooms: Understand
35. A new iPod with 30 new features costs $100 more to produce and buy than
does the previous version. The $100 price increase
A. is added to the inflation rate.

B. is not added to the inflation rate because consumer electronics are not part
of the inflation rate.
C. is not added to the inflation rate because it represents an improvement in
quality.
D. is divided by the additional benefits and then added to the inflation rate.
Because it is an improvement in quality, the increase is not considered

inflationary by the BLS.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
36. A pure price change occurs
A. when inflation increases the price of an item.

B. when technology and quality improve an item.
C. when inflation exceeds expected inflation rates.
D. with unanticipated inflation.
A pure price change is simply a change in the price of an item without any
change in the quality or nature of that product.

Blooms: Understand
Difficulty: 3 Hard
37. As of 2009, the average household earned $49,777. In 1979, the average
household earned $16,461. Although it appears as though incomes have
tripled, other prices have risen too. This illustrates a concept known as
A. deflation.
B. disinflation.
C. money illusion.
D. COLA.
Money illusion happens when we compare dollar amounts for different time
periods without adjusting for inflation.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
38. Of the categories of spending listed below, which is the smallest component of
the market basket?
A. Food at home.
B. Medical care.
C. Apparel.
D. Education.

Blooms: Remember
A. anticipating inflation over 2% from year to year.

B. the amount of inflation that households and businesses expect will continue
into the future.
C. the opposite of disinflation.
D. based on inflation-adjusted averages year to year.
Expected inflation is the amount of inflation that households and businesses

expect will continue into the future.

Blooms: Remember
40. As an example of hyperinflation, one U.S. dollar was equal to _________
German marks in 1923, compared to 8.9 marks in 1919.
A. 0.001
B. 1
C. 1,000
D. 1 trillion
Hyperinflation is very rapid inflation. Germany experienced so much

hyperinflation that the mark essentially became worthless.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
41. Annual inflation equal to 1,000% means that prices are rising by
A. 100 times in a year.

B. 10 times in a year.
C. 500 times in a year.
D. 1,000 times in a year.
Brazil experienced 1,000% inflation between 1989 and 1994, which means that
prices rose by 10 times in a year.

Blooms: Understand
Difficulty: 1 Easy
42. In 1973, the oil embargo sparked a wage-price spiral due to higher energy
costs. In 2004, with a similar spike in oil prices, there was not a corresponding
wage-price spiral. The cause of this was
A. Heavy government regulation.

B. Alternative energy sources.
C. Competition from overseas keeping a lid on wages and prices.
D. Unanticipated inflation.
See "Spotlight: The Oil Trigger" in the textbook.

Blooms: Understand
43. What is the cost of transactions as it relates to the harm caused by inflation?
A. The cost associated with the time and effort of managing your spending.
B. The cost of the products whose prices are rising.
C. Production costs plus profit.
D. The cost of the BLS market basket.
If high levels of inflation occur, people spend more time and effort trying to
avoid the effects of inflation on their spending, and this time and effort are
costly.
AACSB: Analytic
Blooms: Remember
Difficulty: 3 Hard
44. COLA provisions automatically increase wages or benefits to match
A. inflation.
B. disinflation.
C. deflation.
D. the cost of living.
COLAs (or cost of living adjustments) are built into some contracts to increase
payments as prices increase.

Blooms: Understand
45. Which of the following countries has not experienced hyperinflation?
A. Norway.
B. Brazil.
C. Germany.
D. Bolivia.
Hyperinflation has recently been a problem in some South American countries,

like Brazil and Bolivia, and Germany's hyperinflation in the early 1920s is a
classic example that is also mentioned in the textbook.
AACSB: Analytic
Blooms: Remember
46. In the United States, inflation peaked around
A. 1980.
B. 1982-1984.
C. 1929.
D. 1973.
See Figure 8.2 in the textbook.

Blooms: Understand
47. Money illusion occurs
A. at a magic show.
B. when money disappears.
C. when we disregard inflation adjustments for dollar values.
D. when prices decrease.
Money illusion is the mistake that we make when we compare dollar amounts
in different periods without adjusting for inflation.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
48. Disinflation and deflation are
A. two different terms that describe the same thing.

B. often confused with each other.
C. exact opposites.
D. terms used to describe changes to the GDP.
See the definitions of disinflation and deflation.

Blooms: Understand
Difficulty: 3 Hard
49. Certain behavior associated with expected inflation can
A. reduce inflation rates overall.

B. allow lenders to collect with more valuable dollars.
C. allow borrowers to pay with more valuable dollars.
D. actually increase the overall rate of inflation.
COLAs, for example, can have an inflationary effect on the economy by making
a wage-price spiral more likely to occur.
AACSB: Analytic
Blooms: Apply
50. Unexpected inflation can often
A. reduce price levels below cost.

B. reduce wages below the inflation rate.
C. help borrowers by allowing them to pay back lenders with less valuable
dollars.
D. help lenders collect payments in more valuable dollars.
See the section "The Harm from Unexpected Inflation" in the textbook.

Blooms: Understand
51. The category of spending called "food away from home" makes up a smaller
proportion of the market basket than which of the following categories?
A. Medical care.
B. Gasoline.
C. Education.
D. Food at home.
AACSB: Analytic
Blooms: Remember
52. Suppose a technological advancement makes automobiles 50% safer, and at
the same time, the prices of automobiles go up by 25%. No other prices in the
economy changed. Did the relative price of automobiles rise or fall?
A. It depends on whether the safety improvements raise the cost of producing

automobiles by more than, less than, or exactly 25%.
B. The relative price of automobiles rose because the price went up by 25%
when other prices did not rise.
C. The relative price of automobiles fell because the price increased by 25%
but the safety increased by 50%.
D. It depends on whether consumers demand safer cars.
It is sometimes difficult to disentangle pure price changes from quality

improvements.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
53. Which of the following is an example of a company "offshoring" part of the

production of a service?
A. Scissors for haircuts being produced in China.

B. Technicians overseas reading X-rays taken in the United States.
C. An American traveler getting a tattoo while in Germany.
D. Foreign students studying at American universities.
Services are generally hard to produce elsewhere, but technology is making

this easier. Taking an X-ray requires geographical proximity, but reading it does
not.
AACSB: Analytic
Blooms: Apply
54.
goods. If the overall rate of inflation in the economy was 3.5%, which good(s)
experienced a relative price increase?

B. Amusement park tickets and bowling balls.
C. Camouflage neckties only.
D. All three goods experienced relative price increases.
Relative price shifts occur when the rate at which one good's price increased is
significantly higher or lower than the overall inflation rate.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
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THE
KANSAS UNIVERSITY SCIENCE
BULLETIN.
Vol. I, No. 6—September 1902.
(Whole Series, Vol. XI, No. 6.)

CONTENTS:
I.—New Fossils from the Upper Carboniferous of Kansas, J.

W. Beede.
II.—Variation of the Spiralia in Seminula Argentia (Shepard)

Hall, J. W. Beede.
PUBLISHED BY THE UNIVERSITY,

Lawrence, Kan.
Price of this number, 15 cents.
Entered at the post-office in Lawrence as second-class matter.

Kansas University Science
Bulletin.
Vol. I, No. 6. SEPTEMBER, 1902. { Whole Series,

{ Vol. XI, No. 6.
NEW FOSSILS FROM THE UPPER
CARBONIFEROUS OF KANSAS.
BY J. W. BEEDE.
With Plate V.
The following will be of interest and value in completing the faunal

succession of the uppermost part of the Carboniferous, as well as for
the biologic interest of one of them.
Ceriocrinus harshbargeri, n. sp. Plate V, figs.

1–1c.
The distinctive features of this species are: Surface ornamented
with both pustules and granules, large interradial supporting plate
above calyx, ten short, massive arms.
Description: Calyx basin-shaped, shallow, quite concave below.
Infrabasals partly covered, but located entirely within the body
cavity. Stem small and apparently round. The five basals are large,
recurved below the middle, concave in the center of the more
depressed part, four apparently hexagonal and one heptagonal, and
larger than the others supporting the interradial; all higher than
wide, sutures not much depressed. There are five large, massive
radials a trifle more than twice as wide as high, well beveled, faceted,
and apparently sagging a little on the upper articular surface.
Interradial large, fully half within the calyx, higher than broad, and
the upper portion very strongly curved inward. This plate supports
another entirely without the calyx, which is comparatively large and
appears to be pentagonal when seen from without, the two upper
sides being much longer than the rest, making the plate appear
triangular at first sight, fitting closely between the arms on either
side. The five brachial plates are large, contiguous save on the
posterior side, and produced into an obtuse spinous process. Much
of the upper surface of these processes is faceted, supporting the
costals, and in this manner giving the animal its greater lateral
diameter above the calyx, and affording more room for the massive
arms which, when closed, form a box around the inner part. The
costals are ten in number, two to each brachial, large, nearly three
times as broad as high, and convex. The distichals are sometimes
present and sometimes wanting, very broad and thin when present.
Arms ten, broad, outer surface of each nearly flat massive, composed
of two series of interlocking plates, each one of which bears a
pinnule. Pinnulæ long and narrow. The articular surface of the arm
plates is minutely crenulated. These plates decrease in length though
but little in height as they approach the tips of the arms. The surface
of almost the entire animal was ornamented with granules, and the
lower part with both granules and pustules.
Measurements: height. breadth. length.

Calyx 11 mm. 30 mm.
Basals (vertical) 5½ „ 12 „
Radials 9 „ 18+ „
Brachials 7 „ 17 „ 8 mm. beyond calyx.
Costals 4 „ 9 to 11 mm.
Distichals 2 „ 9 „
Arm plates 2 „ 3 to 5 „
Interradial 7 „ 6 „
Aside from the markings mentioned, the calyx is also ornamented

with depressions which look at first like borings of some kind, but
which have the same granular character as the rest of the surface.
Position and locality: Carboniferous, Upper Coal Measures,
Topeka, Kan., from the Osage City shales, over the Osage coal.
The type was collected by Prof. W. A. Harshbarger, in honor of
whom it is named. Type now in the collection of Washburn College.
In general appearance this species is strikingly like C. craigii
Worthen, but differs in the following respects: The body is not
smooth but highly ornamented, and the anal piece is much larger. In
all specimens of C. craigii that I have seen the body is smooth and
glossy, and shows (even when apparently unworn) no indications of
former surface-markings, while this species possesses both pustules
and granules, the latter covering about the entire specimen. In
mature individuals the interradial is much larger. Two smaller
specimens, probably younger ones of this species, are figured in the
accompanying plate, showing the relative growth of the calyx and
interradial. In both the ornamentation is the same as described in
this species. C. monticulatus Beede is from the same locality and
horizon, but has long, slender arms, brachials not spinous, and the
calyx is deeper. The most fundamental difference, however, is the
number of arms possessed by the latter species, the number being
sixteen or eighteen, while the one here described has but ten.
C. nodulifera Butts differs from this species in having a node at the
upper part of each basal and also on the radials. It also has more
acute and apparently longer spines. Mr. Butts makes no mention of
finer surface-markings. The Topeka specimen is from a much higher
horizon.
Aviculopecten subequivalvus, n. sp. Plate V,
figs. 3, 3a.
Shell thick, moderately large, subequivalvular, rather convex, quite
oblique, ears well developed. The hinge is nearly straight, the beak
does not project, the angle of divergence of its sides is about eighty to
ninety degrees. The left valve, exclusive of the ears, is ovate; anterior
ear well developed, obtusely angular, marked only by strong lines of
growth; the rise from the ear to the body of the shell is abrupt; the
marginal sinus separating the ear from the rest of the shell broad,
shallow, and ill-defined. The posterior ear is unknown. The anterior
margin below the ear forms an ovate curve, which is probably
continued on the ventral and postero-ventral margins. The surface of
this valve is apparently marked only by stronger and fainter
concentric lines except on the front and back sides, where there are
radiating rows of vaulted lamellæ. It is entirely probable that these
marks once extended over the entire surface, but have been worn off
from the more convex portions. Judging from another specimen, the
right valve is somewhat flatter than the left and quite as oblique.
Posterior ear very small and obtuse; anterior ear quite large, marked
by obscure, large, radiating ribs and probably vaulted lamellæ, as
well as strong concentric markings; separated from the shell by a
deep sulcus. Margin from the beak around the posterior to near the
middle of the shell is a regular ovate curve, antero-ventral margin
somewhat produced but rounded, extending obliquely toward the
beak until the deep byssal sinus is reached. Ornamentation as in the
other valve. In this specimen it seems that the radiating rows of
scales covered the entire surface before being worn away. Length, 36
mm.; height, 32 mm.; hinge, 17 mm.; thickness, about 5 mm.
Position and locality: Thin limestone, south of Dover, Kan., in
Upper Coal Measures. Type in author’s collection.
This shell may prove to be a Pseudomonotis, as the critical
characters are not well known. It is not liable to be confused with any
other shell from the Coal Measures.
Pinna lata, n. sp. Plate V, fig. 4.
Shell small for this genus, not very convex, probably plain except
the usual growth marks, acutely pointed at the beaks, which are
terminal. The angle of divergence of the shell is thirty degrees. This
species is based on three casts. The type is not distorted, but the
posterior end is broken away. There are two other specimens from
the same locality, but compressed dorso-ventrically, which show the
same characters as the type. The size is about that of Aviculopinna
americana Meek, but the form and markings as shown on the cast
are very different, and the beaks are terminal. Length of type along
hinge, 27 mm.; height (20 mm. back of beak), 11 mm.
Position and locality: Carboniferous, Upper Coal Measures,
Howard limestone, Topeka, Kan.
The small size, great angle of divergence at the beak and sharp-
pointed beaks easily distinguish this species from other members of
the genus from the Coal Measures.
Pleurophorus whitei, n. sp. Plate V, figs. 5, 5b.
Pleurophorus —? White, Bull. U. S. Geol. Surv. 77, p. 27, pl. iv, figs.
5–10.
Shell of medium to large size, transversely ovate, with the depth of
the shell greater at the anterior than at the posterior end. Beaks
moderately prominent, subterminal; umbonal ridge prominent,
extending obliquely to postero-ventral margin. Hinge straight or
arcuate, usually about three-fourths the length of the specimen. The
right posterior lamina is well shown on good casts. The anterior
adductor impression is usually prominent, being set apart by the
depression produced by the ridge behind it. The impression of the
two cardinal teeth is also visible. The anterior margin drops
obliquely downward from the beak nearly to the middle of the shell,
when it rounds, rapidly at first, into the ventral margin, which may
be straight, somewhat sinuous or even convex on approaching the
postero-ventral region: at the end of the umbonal ridge it rounds
rapidly into the posterior, oblique truncation, reaching the hinge at
an oblique angle. The lines formed by the hinge and ventral margins
converge toward the posterior, thus leaving the greatest depth of the
shell in front. Above the umbonal ridge the shell is obliquely
flattened to the hinge. The surface, as shown in excellent molds, is
ornamented only by fine lines of growth, which are sometimes a little
stronger beneath the beak than elsewhere, and weaken on and above
the umbonal slope.
Position and locality: This species is found in the Upper Coal
Measures, upper Wabaunsee stage, east of Barrett, Kan. This is the
only locality known to the writer where this shell, abundant in the
Permian, is found below the Wreford limestone. Types from Permian
west of Stockdale, Kan., “about 100 feet above Cottonwood
limestone.” Collected by Prof. E. A. Popenoe.
This species is extremely variable, as shown in Professor White’s
figures, above cited. The short shell with the posterior shallower than
the anterior end is in sharp contrast to most of the species of the
genus. In surface ornamentation it resembles P. tropidophorus more
closely than any other species. It is distinguished from P.
subcuneatus Meek by its short, thick form and larger size. This
species is the more abundant of the two in the Permian rocks of the
Big Blue series, while P. subcuneata only has been identified from
the Cimarron series.
Allorisma kansasensis, n. sp. Plate V, figs. 6,
6d.
Shell small, rather gibbous, transversely subovate. Beaks
prominent, incurved, approximate, located about one-third the
length of the shell from the anterior end. Anterior outline descending
obliquely from the beaks nearly to the ventral margin, where it turns
rather abruptly backward along the nearly straight basal edge to the
posterior extremity, where it rounds off regularly upward and then
forward to meet the hinge. The hinge is apparently straight and more
than half as long as the shell. The umbonal ridge is prominent,
rounded, ill-defined, fading away at the extremity of the shell. Above
this ridge is a depression which, with the smooth, elevated hinge,
would cause a strong keel on the shell back of the beaks. The
concentric ribs are prominent, fading out at the upper part of the
umbonal ridge and near the anterior border. These ribs are quite as
prominent on the casts as on the shell itself. On the central and
postero-central regions are the characteristic distant, radiating rows
of fine, closely set granules. The shell is less convex below and back
of the beak than on either side of this region, though it is not
concave. The length varies from 1.7 to 1.4 the height.
Position and locality: Upper Coal Measures, Howard limestone,
Topeka, Kan.
This species is very closely related to A. curta Swallow, but differs
from it in having a straighter hinge and a more remote beak. It is
from a lower horizon. In the latter respect it differs from
McChesney’s species also.
Paleontological Laboratory, Indiana University,

May 22, 1902.
Explanation of Plate V.
All figures about natural size. Drawings by C. McK. Beede.
Ceriocrinus harshbargeri.
Fig. 1. Right posterior view of type.

Fig. 1a. Diagram of anal plates of same.
Fig. 1b. Surface detail enlarged.
Fig. 1c. Diagram of basal view.
Fig. 2. Calyx of another specimen, probably of this species.
Fig. 2a. Diagram of a portion of posterior view of another slightly
smaller specimen, showing variation in size of anal
plate.
Aviculopecten subequivalvus.
Fig. 3. View of type. One side incomplete.

Fig. 3a. Opposite valve of another specimen.
Pinna lata.
Fig. 4. View of type, a left valve.

Pleurophorus whitei.
Fig. 5. Type specimen; cast of a left valve on the same slab as

the two following and the cephalothorax of a large
limuloid.
Fig. 5a. Cast off a broken specimen, showing the anterior
muscular impressions.
Fig. 5b. Specimen of different outline.
Allorisma kansasensis.
Fig. 6. Imperfect cast, showing strong concentric undulations

impressed upon it.
Fig. 6a. Lateral view of type. Shell exfoliated in front.
PLATE V.
VARIATION OF THE SPIRALIA IN
SEMINULA ARGENTIA
(Shepard) Hall.
BY J. W. BEEDE.
With Plate VI.
Owing to the systematic importance and the rarity of good

material of the brachial framework of the brachiopods, any light on
the extent of individual variation of these parts is of considerable
importance. In the spring of 1899 the University of Kansas received
from Prof. C. N. Gould a set of ten specimens of Seminula argentia
(Shepard) Hall that show the position of the spires. These specimens
were all from the same horizon in the Lower Permian. The University
also had another specimen showing these characters, as did a
specimen in the writer’s collection. Recently the study of these
specimens was taken up and some remarkable results developed.
Both valves of this species are quite convex and not infrequently as
broad as long. The older specimens are quite ventricose. However,
the shell is subject to a considerable variation in form. Four of the
twelve specimens studied were somewhat compressed, but it so
happens that three of these approach the normal type very closely,
while the fourth does not vary from it greatly. Those showing
greatest variation have not been subject to any visible external
deformation. The specimens under discussion are of about the
average size and form.
The normal position of the spire is with its apex pointing to the
side, near the line where the valves meet, at, or a little in front of, the
middle of the shell, which is also the widest point. In the central part
of the shell cavity the edges of the spires nearly meet. In front they
flare apart, leaving a large, subcircular opening. For convenience, in
this paper, this opening will be spoken of as the frontal aperture of
the spiralia. It will also be necessary to orient the specimens so that
definite positions may be referred to. For this purpose we will
consider the specimens as front toward (back away from) the
observer, with the brachial valve uppermost.
A specimen from the Topeka limestone, Upper Coal Measures, at
Topeka, Kan., shows the spires with the apex of one of them pointing
almost directly forward toward the anterior end of the shell, turned
through a horizontal angle of about ninety degrees from its normal
position, while, as nearly as may be determined from the specimen
as cut, the apex of the other one is directed toward the median line of
the pedicle valve just in front of the hinge. This specimen was
selected to be ground, because it was a good specimen, of normal
form. Another specimen (No. 3), from the Permian of Cowley county,
Kansas, has the apices of the spires turned at an angle of about forty-
five degrees or more in a vertical direction, causing the point of the
spire to be located near the middle of the right side of the brachial
valve, while the other points to the opposite of the pedicle valve. The
spire is quite flattened, approaching disk shape, with the apex quite
obtuse and the frontal aperture very narrow and almost slit-like (this
may be partially due to a very slight compression, but the
compression, if present, is so slight as to modify it very little), owing
to the position of the spires in the shell, which prevents their flaring
much at the front. The shell is not an old one, and, for this reason, is
somewhat less ventricose than many adults. The young specimens
are much flatter than the old ones in this species.
The spiralia of No. 10 are turned in a similar manner, but through
a much smaller angle. The frontal aperture is typical, as is also the
general form of the shell. The spiralia are conical, and the tips
probably acute. In No. 6 the position of the spiralia, their form and
that of the aperture are normal. Nos. 6 and 9 show spines on the
spires. The spines are closely set, thick, blunt, and nearly twice as
long as broad. In fact, some appear to be nearly as large at the tips as
at the base. In No. 9 the spires are normal, except that, instead of
being flaring conical, they are more in the shape of a folded shield
shape with acute apex. In other words, the frontal aperture is
produced by the dorso-ventral compression of the entire cone rather
than the flaring of the frontal portion. The apex of the left spire is
bent somewhat downward. The position of the spiralia in No. 7 is
about normal, the tips obtuse, the spires almost perfectly depressed
conical, frontal aperture only slightly wider than the space farther
back on the side next the brachial valve. No. 5 has apparently been
compressed laterally, through this compression did not affect the
positions of the spiralia, for they are normal. They appear to have
been of the typical form in every respect. In No. 8 the spires seem to
have been turned through a slight vertical angle, though the
incompleteness of the specimen prevents a close study of position.
The form was apparently normal, except that the lower edges may
have been somewhat pressed inward. Nos. 1 and 4 are about normal
throughout. No. 2 is normal as far as can be seen, except that the
apices are turned through a small vertical angle. The anterior portion
of the pedicle valve is crushed in. No. 12 is normal throughout.
It is unfortunate that none of the specimens show the crural
attachment of the spiralia. Such structures must certainly vary in
order to support the spires in their various positions.
The above facts would seem to indicate the following conclusions:
First, in those spire-bearing brachiopods in which the form of the
shell does not govern the position of the spires, the Athyridæ in
particular, the spires may be subject to a considerable variation in
both position and form. Second, that the crural supports are
probably so modified as to accommodate the spires in their various
positions.
In the light of the foregoing, it will be seen that in the future it will
be necessary to study the structure of several specimens before using
small variations of internal structure in these shells as bases for
group divisions.
One might expect greater individual variation among the Flint
Hills specimens, owing to the physical changes that were taking place
during the close of the Carboniferous and the early Permian; changes
which soon caused this species, together with many others, to
become extinct. However, this cannot be said of the most striking
case (No. 11) from the Topeka limestone. It would seem that such
variations as are found in Nos. 3 and 11 would be decidedly
detrimental to the well-being of the animal, though the latter of the
two seems to have been a vigorous individual.
Indiana University, Bloomington,

April 8, 1902.
Explanation of Plate VI.
Drawings by Sydney Prentice, except No. 12, which is by C. McK.
Beede.
All specimens natural size.
Seminula argentia. Variation of spires.
Fig. 1. Specimen brachial side up.

Fig. 2. This specimen shows spires viewed with pedicle
side partly removed.
Fig. 3. Pedicle view, showing part of spire.
Fig. 3a. Above individual, brachial side up.
Fig. 4. Brachial side of fig. 4a.
Fig. 4a. Pedicle view of specimen, showing position of
spires.
Figs. 5 and 5a are the brachial and pedicle views of a somewhat
laterally compressed specimen.
Fig. 6. Pedicle view of specimen.
Fig. 6a. Brachial view of fig. 6.
Figs. 7 and 7a are the brachial and pedicle views of a specimen.
Fig. 8. This figure probably shows the brachial side of
specimen, while fig. 8a is the opposite side.
Fig. 9. Brachial view.
Fig. 10. The pedicle view of a specimen, and fig. 10a the
brachial side of the same.
Fig. 11. Brachial valve nearly ground away, to show spire.
The sickle-shaped structure is probably the base
of the opposite spire. Beede’s collection.
Fig. 12. Specimen with brachial valve largely broken away.
All specimens but No. 11 in collection of University of Kansas.
PLATE VI.
TRANSCRIBER’S NOTES
1. Silently corrected obvious typographical errors and
variations in spelling.
2. Retained archaic, non-standard, and uncertain spellings
as printed.
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Economics The Basics 2nd Edition

Mandel Test Bank

True / False Questions

4. The CPI measures the changes of one category of products.

6. Core inflation includes energy and food cost increases.

9. Real dollars are also called inflation-adjusted dollars.

Multiple Choice Questions

11. Inflation can be defined as

A. an overall increase in prices.

A. one of the key measures in the GDP.

A. the price of a single good.

14. What is the CPI?

A. The Consumer Price Institute.

A. 100 to represent the average 1982-1984 price level.

16. Core inflation is defined as

A. inflation that takes energy and food into account.

A. the inflation rate of a good or service remains unchanged.

19. Some goods have become less expensive due to

A. globalization and technology.

20. Money illusion occurs when we compare dollar amounts

A. without adjusting for technology.

22. The formula for a real percentage change is

A. the nominal percentage change minus the inflation rate.

23. Expected inflation is

A. the inflation rate that governments require from year to year.

A. a moderate increase in prices from year to year.

A. businesses boost prices and wages to try to stay ahead of higher-than-

27. Unexpectedly high inflation tends to hurt _______ most.

28. What is deflation?

A. An increase in the price level that reduces the GDP.

32. What does the phrase "owners' equivalent rent" mean?

A. It is the price of five years' worth of housing services.

A. Personal computers and peripherals.

A. counts that increase as part of the inflation rate.

A. is added to the inflation rate.

36. A pure price change occurs

A. when inflation increases the price of an item.

39. Expected inflation is

A. anticipating inflation over 2% from year to year.

A. 100 times in a year.

A. Heavy government regulation.

44. COLA provisions automatically increase wages or benefits to match

46. In the United States, inflation peaked around

47. Money illusion occurs

48. Disinflation and deflation are

A. two different terms that describe the same thing.

49. Certain behavior associated with expected inflation can

A. reduce inflation rates overall.

A. reduce price levels below cost.

A. It depends on whether the safety improvements raise the cost of producing

53. Which of the following is an example of a company "offshoring" part of the

A. Scissors for haircuts being produced in China.

A. Amusement park tickets only.

A. Amusement park tickets only.

A. The real price of amusement park tickets rose by 1.5%.

A. The real price of all three goods increased.

A. The real price of camouflage neckties fell by 0.4%.

A. It rose because $9.05 is greater than $8.40.