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4.2 Inflation

Authored by Jamie Walles

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4.2 Inflation
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5 questions

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1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is inflation?

A decrease in the general price level

A sustained increase in the general price level

A constant price level over time

A decline in consumer spending

Answer explanation

  1. Inflation refers to a persistent and sustained rise in the general price level of goods and services in an economy over a period of time.

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What measure is used to determine the level of inflation?

Consumer Price Index
Gross Domestic Product
Unemployment Rate
Interest Rate

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Demand-pull inflation occurs when:

Production costs rise due to factors like higher wages or raw material prices

Aggregate demand exceeds aggregate supply, leading to rising prices

Central banks reduce the money supply to control inflation

Consumer preferences shift towards cheaper goods

Answer explanation

Demand-pull inflation happens when total demand for goods and services surpasses the economy's productive capacity, causing upward pressure on prices.

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

One of the negative consequences of high inflation is:

Increased purchasing power for consumers

Encouragement of long-term saving and investment

Erosion of real income and savings

Reduced need for central bank intervention

Answer explanation

High inflation erodes the purchasing power of money, reducing the value of people's income and savings over time.

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

One limitation of using the CPI as a measure of inflation is that it:

Does not account for the quality of goods and services
Measures the price of all goods and services
Is not affected by changes in the money supply
Does not include imported goods

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