Inflation Quiz

What is inflation?

• D. A decrease in the demand for goods and services

• C. An increase in the supply of money in the economy

• B. A general and sustained rise in the level of prices of goods and services

• A. A decrease in the level of prices of goods and services

How is inflation measured?

• A. Using the Gross Domestic Product (GDP)

• B. Using a Consumer Price Index (CPI) or Retail Price Index (RPI)

• C. Using the Producer Price Index (PPI)

• D. Using the Unemployment Rate

What is the average change in price if the price index rises by 25% in the first year and then by 10% in the next year?

• A. 35%

• B. 25%

• C. 37.5%

• D. 15%

What is demand-pull inflation?

• B. Inflation caused by an increase in the cost of production

• A. Inflation caused by a decrease in aggregate demand

• D. Inflation caused by a decrease in the money supply

• C. Inflation caused by an increase in aggregate demand

What is cost-push inflation?

• D. Inflation caused by a decrease in the money supply

• C. Inflation caused by an increase in aggregate demand

• B. Inflation caused by an increase in the cost of production

• A. Inflation caused by a decrease in aggregate demand

What is the key reason for inflation according to many economists?

• B. Rise in the cost of raw materials

• A. Increase in government spending

• D. Decrease in consumer spending

• C. Rise in the money supply in contrast with output

What happens to purchasing power when the price level rises?

• D. It fluctuates

• C. It decreases

• A. It increases

• B. It remains the same

How does inflation affect the competitiveness of exports in international markets?

• C. It makes exports less competitive

• B. It has no effect on exports

• A. It makes exports more competitive

• D. It increases the demand for exports

What is the consequence of inflation causing inflation?

• D. Increase in the cost of living

• C. Increase in the value of fixed income

• B. Increase in the cost of production

• A. Decrease in the cost of living

Who loses during inflation according to the text?

• D. Borrowers and savers

• B. Workers and lenders

• C. Savers and exporters

• A. Borrowers and exporters