Unit 5 Learning Target 3 Practice Quiz

"A general increase in prices and fall in the purchasing value of money" best defines which of the following?

• Rate of Inflation

• Deflation

• Inflation

• Disinflation

What causes demand pull inflation?

• rise in price due to a decrease in supply
• a rise in price level due to an increase in consumption
• a rise in price due to an increase in the cost of production
• a decrease in price due to a decrease in supply

The US tries to maintain an inflation rate of ______ per year.

• One percent or less

• One to three percent

• Four to five percent

• Six to seven percent

In _________ Inflation prices rise very fast at double or triple rate.

• Walking

• Running

• Hyper

• Creeping

Inflation caused by a rise in wage rates would be classified as..

• Demand pull

• Demand push

• Cost push

• Cost pull

If CPI last year was 177 and the CPI this year is 186, what is the rate of inflation?

• 5%

• 6%

• 8%

• 9%

Based on the chart given, what is the CPI in 2017 if 2016 is the base year is the typical household buys 2 loaves of bread, 2 pounds of cream cheese and 2 books?

• 1.214

• 121.4

• 100

• 142.1

Answer explanation

To find the value of the market basket of goods in 2016: (2x$2)+(2x$6)+(2x20) = 4+12+40=$56

To find the value of the market basket of good in 2017: (2x$3)+(2X$6)+(2x$25) =$68

Now you have what you need to find the CPI in 2017:

(68/56) x 100=CPI 2017

68/56=1.214; 1.214 x 100=121.4

Which of the following is a consequence of hyperinflation?

• Stable prices

• Decreased value of currency

• Increased purchasing power

• Lower interest rates

What is the term for a sustained decrease in the general price level of goods and services?

• Inflation

• Deflation

• Stagflation

• Reflation

Which of the following is NOT a type of inflation?

• Cost-push inflation

• Demand-pull inflation

• Structural inflation

• Fiscal inflation