Which of the following is the correct definition of inflation?

• A sustained rise in the general price level over time

• A increase in prices of goods and services

• An addition to the number of goods in a ‘basket’

What is the rate of inflation?

• The change in inflation over time

• The percentage rise in the general price level over time

• The change in the price level over time

• The percentage change in the general price level over time

What is a nominal value?

• One that takes inflation into account

• One that does not take inflation into account

• One that is referred to as a number

• One that is referred to in money terms

What is a real value?

• One that takes inflation into account

• One that does not take inflation into account

• One that is referred to as a number

• One that is referred to in money terms

If the original value is £100 and the new nominal value is £102 what is the percentage change in nominal income?

• 1%

• 2%

• 3%

• 4%

If the original value is £100, the new nominal value is £102, and the rate of inflation is 3%, what is the percentage change in real income?

• -1%

• -2%

• 1%

• 2%

What is the correct definition of ‘demand-pull’ inflation?

• When aggregate (total) supply exceeds aggregate demand

• When aggregate demand exceeds aggregate supply

• When there is a rise in aggregate demand

• When there is a rise in the exchange rate

What is the correct definition of ‘cost-push inflation’?

• When there is a rise in aggregate supply

• When firms seek to rise prices to increase profits

• When costs of production rises

• When workers ask for wage increase

What is a consequence of inflation for consumers?

• Increase in consumer confidence

• Shoe leather costs

• Real incomes increase

• Consumers who are debtors lose

What is a consequence of inflation for producers?

• Menu costs decrease

• Less flexibility

• Producers lack business confidence

• Producers gain as creditors