18.3 Inflation and Bubbles

What is the effect of a two percent raise in income when prices rise by five percent?

• The raise in income is tripled

• The raise in income is real

• The raise in income is not real

• The raise in income is doubled

What does the Consumer Price Index (CPI) measure?

• Unemployment rate

• GDP growth rate

• Overall price levels in a country

• Stock market performance

What is the main cause of Demand Pull Inflation?

• Decrease in availability of productive resources

• Increase in production cost

• Too much money chasing too few goods

• Decrease in consumer spending

What is the primary cause of Cost Push Inflation?

• Increase in production cost

• Decrease in availability of productive resources

• Too much money chasing too few goods

• Increase in consumer spending

What is the main cause of inflation in Venezuela?

• Decrease in oil prices

• Economic mis-management

• Political instability

• Natural disasters

What is the effect of increased demand and decreased supply on the price of chocolate?

• No effect on price

• Decrease in price

• Increase in price

• Fluctuation in price

What is the primary cause of the rise in home prices during the early 2000s?

• Increase in population

• Shortage in building materials

• Speculation and easy credit

• Decrease in consumer spending

What is the main reason for the collapse of a bubble?

• Decrease in demand

• Increase in supply

• Speculation and unsustainable price increase

• Stable market conditions

What is the main lesson from the Dutch tulip mania?

• Tulip mania was a sustainable economic trend

• Tulip bulbs are now very expensive

• Speculation can lead to unsustainable price increase

• Tulip bulbs are a good investment

How can understanding inflation help you in the future according to the video?

• To invest in real estate

• To predict stock market performance

• To negotiate a real raise adjusted for inflation

• To understand the history of bubbles