1.

(02.05 HC) Use the table below to answer the question that follows.

Year	CPI
Year 1	100
Year 2	110
Year 3	85
Year 4	150
Year 5	105

Which statement below would accurately describe the economy above? (5 points)

	Overall, it is showing consistent growth.
	Its inflation rates would cause much uncertainty.
	The average price level is stable across the five years.
	Borrowers would be happy in year 3.
	It illustrates the value of fixed-rate loans.

2.

(02.05 MC) Which of the following is a consequence of unexpected inflation that negatively impacts everyone in the economy? (5 points)

	Employers are able to compensate workers with wages that have lower purchasing power.
	Borrowers must pay back money that obtains fewer goods and services than when it was originally lent.
	The average price level remains perfectly stable.
	The resulting uncertainty makes it difficult to assess costs, benefits, and risk.
	Adjustable-rate loans are modified to take into account the change in purchasing power.

3.

(02.05 LC) An increase in ______ represents _____. The speed of the increase is ______. (5 points)

	average price level; inflation; the inflation rate
	average price level; the inflation rate; inflation
	borrowing; the inflation rate; the circular flow
	lending; the inflation rate; the circular flow
	uncertainty; inflation; the inflation rate

4.

(02.05 MC) Which of the following would benefit borrowers of fixed interest rate loans at the expense of their creditors? (5 points)

	The actual inflation rate is less than the expected inflation rate.
	The actual inflation rate is more than the expected inflation rate.
	Hyperinflation begins to occur in the economy.
	The average price level remains perfectly stable.
	The average price level fluctuates wildly for a sustained period.

5.

(02.05 MC) Which of the following groups would benefit from an increase in the average price level in an economy? (5 points)

	Individuals and institutions who have loaned money
	Borrowers of loans with rates that automatically adjust with inflation
	Those controlling resources whose prices increased by more than the average
	Those controlling factors of production whose prices decreased during the same period
	The creditors for capital investment loans