Inflation

Identify which of the following situations best explains a cause of cost-push inflation.

• A decrease in interest rates

• An increase in production costs

• A decrease in consumption spending

• An increase in private investment

Identify which of the following situations best explains a cause of demand-pull inflation.

• A decrease in the labour force

• A decrease in consumption spending

• An increase in interest rates

• An increase in government spending

What do we call it when the rate of inflation decreases?

• Disinflation

• Deflation

• Hyperinflation

• Galloping inflation

What type of inflation is represented here? (Please disregard the fact that LRAS is not shown)

• Demand-pull inflation

• Cost-push inflation

• Hyperinflation

• Deflation

(HL) The weighted price index of year 1 was 104.3, and that of year 2 was 112.6. What was the rate of inflation between the two years?

• 8.3%

• 7.37%

• -7.37%

• 7.95%

Which of the following is not a likely effect on a country if it is experiencing a high level of inflation?

• Increased real value of savings

• Demand for higher wages

• Decreased investments

• Higher interest rates

_______ inflation happens when SRAS falls below AD.

In an inflationary spiral, what causes SRAS to shift inwards?

• Interest rates start rising

• Consumption increases

• Workers demand higher wages, increasing costs of production

• Savings decrease

Which is not a consequence of inflation?

• Reduction in international competitiveness (net exports decrease)

• Disproportional effect on low-income earners

• Increase in nominal interest rates

• Higher cyclical unemployment

According to Keynesian economists, does an increase in AD necessarily lead to demand-pull inflation?

• Yes, always.

• Yes, but only if the economy is operating close to or at full employment.

• No, never.