A household saves $2000 in a certificate of deposit (CD) at 5 percent annual interest. If inflation is 8 percent during that year, what is the approximate real value of the savings at the end of the year?
Explanation
This quantitative question tests the ability to calculate the real value of savings by first applying the nominal interest rate and then adjusting for the rate of inflation, demonstrating the concept of purchasing power.
Other questions
Which phase of the business cycle is characterized by a temporary maximum in business activity, with the economy at or near full employment and the price level likely to rise?
What is the immediate cause of the large majority of cyclical changes in the levels of real output and employment, according to most economists?
During a business cycle, which industries are most affected by the fluctuations in output and employment?
Using the data provided in the text for the year 2007, where the labor force was 153.1 million and the number of unemployed individuals was 7.1 million, what was the unemployment rate?
What type of unemployment includes workers who are searching for jobs or are waiting to take jobs in the near future?
When is the economy considered to be 'fully employed'?
According to Okun's law as described in the text, if the actual unemployment rate is 7 percent and the natural rate of unemployment is 4 percent, what is the size of the GDP gap?
Which demographic group, according to Table 26.2, experienced the highest unemployment rate in both 2002 and 2007?
What is the primary measure of inflation in the United States, compiled by the Bureau of Labor Statistics?
What type of inflation arises from an excess of total spending beyond the economy's capacity to produce?
According to the text, who is hurt by unanticipated inflation?
If a person's nominal income increases by 8 percent and the price level increases by 5 percent in a particular year, what is the approximate change in their real income?
What is the relationship between the real interest rate, the nominal interest rate, and the inflation premium?
What is the economic impact of cost-push inflation on real output?
According to the rule of 70, if the inflation rate is 10 percent per year, how long would it take for the price level to double?
Workers who are not actively seeking employment are classified by the BLS as:
The unemployment that occurs when workers' skills and experience become obsolete or unneeded due to changes in consumer demand and technology is known as:
What is the primary economic cost of unemployment?
What is the natural rate of unemployment (NRU)?
According to the text, what is the term for a decline in the price level?
What is the primary source of cost-push inflation?
During which of the following recessions listed in Table 26.1 was the decline in real output the greatest?
What is the key difference between frictional and structural unemployment?
What is a key reason that cost-push inflation is considered automatically self-limiting?
If a lender charges a nominal interest rate of 11 percent and the expected rate of inflation is 6 percent, what is the real interest rate?
What is the term for a situation where the rate of inflation declines, but the price level is still rising?
What is a GDP gap?
Why do economists view some frictional unemployment as desirable?
Which of the following is an example of a noneconomic cost of severe cyclical unemployment?
The Consumer Price Index (CPI) measures the price of a 'market basket' of some 300 consumer goods and services purchased by:
What is the effect of unanticipated deflation on the real income of a person with a fixed nominal income?
Why do some economists believe that mild inflation is a necessary by-product of strong spending and economic growth?
During the 1981-82 recession, the duration was 16 months. What was the depth, or decline in real output?
If a saver places $1000 in an account with a 6 percent annual interest rate, but the inflation rate is 13 percent, what is the approximate real value of the savings at the end of one year?
What is the term for cost-of-living adjustments that are sometimes included in union contracts to automatically increase pay when the CPI rises?
The BLS lists part-time workers who want to work full-time but cannot find suitable full-time work as:
What is hyperinflation?
According to the text, which group is unaffected or may even be helped by unanticipated inflation?
What does a negative GDP gap signify?
The Last Word section on the stock market suggests that typical day-to-day and year-to-year changes in stock market values have what kind of impact on the macroeconomy?
What is the main reason for the decline in the natural rate of unemployment (NRU) in the United States since the 1980s?
In the context of inflation, what is an 'inflation premium'?
Which of the following would be an example of a worker who is structurally unemployed?
What is the primary reason the average workweek in the United States has declined since the early 1900s while real output has increased?
What is the relationship between the unemployment rate and the GDP gap according to the text?
The 2001 recession in the United States led to a decline in real GDP but not a decline in the price level. This phenomenon is known as:
According to the text, a major reason for the high unemployment rates in several European economies compared to the U.S. is:
The 'rule of 70' is a mathematical approximation used to determine:
What is the primary effect of hyperinflation on the function of money?