1. Masako buys a house in 1999. She obtains a mortgage that carries an annual interest rate of 12 per cent, and makes payments of $880 per month. The CPI in 1999 is 100, in 2000 it is 110, and in 2001 it is 120. What is the real interest rate in 2001? a - 4 per cent b - 21 per cent c - 3 per cent d - 9 per cent 2. Profit-push inflation is caused by: a - Firms lowering prices, causing demand to increase and eventually inflation to rise b - Workers push for higher wages, causing firms to raise prices and their cost of production has now risen c - Firms raising prices to raise profits further d - Firms negotiate lower pay with unions for stronger job security, creating larger profit margins for the firm 3. Wages at a rate greater than the minimum level can: a - create productivity gains if managed correctly b - encourage higher quality candidates to apply for positions c - encourage a labour surplus d - all of the options 4. A rise in the price level means a: a - deflation b - higher value of money c - lower value of money d - lower value of goods
1. Masako buys a house in 1999. She obtains a mortgage that carries an annual interest rate of 12 per cent, and makes payments of $880 per month. The CPI in 1999 is 100, in 2000 it is 110, and in 2001 it is 120. What is the real interest rate in 2001? a - 4 per cent b - 21 per cent c - 3 per cent d - 9 per cent 2. Profit-push inflation is caused by: a - Firms lowering prices, causing demand to increase and eventually inflation to rise b - Workers push for higher wages, causing firms to raise prices and their cost of production has now risen c - Firms raising prices to raise profits further d - Firms negotiate lower pay with unions for stronger job security, creating larger profit margins for the firm 3. Wages at a rate greater than the minimum level can: a - create productivity gains if managed correctly b - encourage higher quality candidates to apply for positions c - encourage a labour surplus d - all of the options 4. A rise in the price level means a: a - deflation b - higher value of money c - lower value of money d - lower value of goods
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. Masako buys a house in 1999. She obtains a mortgage that carries an annual interest rate of 12 per cent, and makes payments of $880 per month. The CPI in 1999 is 100, in 2000 it is 110, and in 2001 it is 120. What is the real interest rate in 2001?
a - 4 per cent
b - 21 per cent
c - 3 per cent
d - 9 per cent
2. Profit-push inflation is caused by:
a - Firms lowering prices, causing demand to increase and eventually inflation to rise
b - Workers push for higher wages, causing firms to raise prices and their cost of production has now risen
c - Firms raising prices to raise profits further
d - Firms negotiate lower pay with unions for stronger job security, creating larger profit margins for the firm
3. Wages at a rate greater than the minimum level can:
a - create productivity gains if managed correctly
b - encourage higher quality candidates to apply for positions
c - encourage a labour surplus
d - all of the options
4. A rise in the price level means a:
a - deflation
b - higher value of money
c - lower value of money
d - lower value of goods
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