6.03_EC83 H. Marketing Applications Review

The main result of inflation is

• reducing the purchasing power of the dollar.

• making everyday products unaffordable.

• pushing most prices down.

• increasing consumer demand.

Which of the following is a true statement regarding inflation:

• It is always caused by consumer demand.

• It impacts only low-income consumers.

• It is a general trend in which some prices may go down.

• It does not affect everyone in the economy.

“Too much cash chasing too few goods” is a description of

• deflation.

• demand-pull inflation.

• cost-push inflation.

• hyperinflation.

Limited commodities can cause

• price stability.

• cost-push inflation.

• demand-pull inflation.

• inflation targeting.

The U.S. government aims to keep inflation at 2%. This is called

• inflation targeting.

• hyperinflation.

• deflation.

• price stability.

Which of the following is a benefit of low, controlled inflation:

• The reduced purchasing power of the dollar

• The scarcity of certain commodities

• The strength of labor unions

• The government’s ability to adjust interest rates

Which type of inflation is harmful to the economy?

• Negative inflation

• Demand-pull inflation

• Cost-push inflation

• Hyperinflation

The main goal of inflation targeting is

• price stability.

• deflation.

• an increase in the money supply.

• a decrease in the inflation rate.

When prices don’t change rapidly and the value of money is stable, it results in

• lower employment.

• consumer confidence.

• cost-push inflation.

• economic depression

Why is deflation bad for the economy?

• It encourages too much spending.

• It causes shortages of goods.

• It reduces output and can lead to layoffs.

• It raises prices for both consumers and businesses.