Inflation

The rate of inflation is most commonly measured by use of

• a price deflator

• the GDP deflator

• the consumer price index

• all of the above

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The consumer price index measures 

• the cost of buying a fixed basket of goods and services, and calculating how this cost changes from year to year

• the cost of buying a basket of goods and services, which changes from year to year depending on the price level

• the cost of buying a basket of goods and services, which changes from year to year depending on consumer tastes and preferences

• all of the above, depending on what the CPI is trying to measure

An increase in aggregate demand is likely to lead to

• demand-push inflation

• cost-push inflation

• demand-pull inflation

• cost-pull inflation

Demand-pull inflation and cost-push inflation differ in that

• demand-pull leads to lower real GDP and cost-push to higher real GDP

• demand-pull leads to higher real GDP and cost-push to lower real GDP

• demand-pull leads to greater unemployment and cost-push to lower unemployment

• a combination of the above, depending on the size of AD and SRAS shifts

What is inflation?

• Inflation is an social studies term that describes a general increase in prices 📈 and a fall in the purchasing power of money 📉.

• Inflation is an economic term that describes a general increase in prices 📈 and a fall in the purchasing power of money 📉.

• Inflation is an economic term that describes a general increase in prices 📈 and a increase in the purchasing power of money 📉.

A little inflation is normal and even good for a healthy economy. Inflation becomes a problem when it grows too quickly.

• True

• False

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What causes inflation?

• inflation occurs when there's an increase in production costs OR when demand for products and services increases faster than supply

• inflation occurs when there's an increase in production costs OR when demand for products and services increases slower than supply

• inflation occurs when there's a slower increase in production costs OR when demand for products and services increases faster than supply

Money supply creates inflation only when ...

• the money is printed slower than the economy grows.

• the money is printed faster than the economy grows.

• the money is printed at the same speed than the economy grows.

Inflation reduced people's purchasing power because

• the same amount of money buys ore goods and services

• the same amount of money buys fewer goods and services

• the market basket has to be changed every year

• there is not enough money in the economy

Who is most likely to be hurt by inflation?

• someone who borrowed money
• a retiree on a fixed income
• a business owner
• the U.S. government

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