Inflation

What is the definition of Cost of Living?

• The cost of purchasing luxury items

• The cost of maintaining a certain standard of living

• The cost of healthcare services only

• The cost of food products

Answer explanation

The definition of Cost of Living is the cost of maintaining a certain standard of living, which includes expenses such as housing, food, healthcare, and other necessities.

Which of the following is included in the expenses considered for the Cost of Living?

• Entertainment expenses only

• Clothing expenses only

• Housing, food, taxes, and healthcare

• Transportation expenses only

Answer explanation

The correct choice is housing, food, taxes, and healthcare, as these are the expenses considered for the Cost of Living.

What is inflation just as much about as it is about price increases?

• The rarity of currency

• The value of currency

• The color of currency

• The size of currency

Answer explanation

Inflation is just as much about the value of currency as it is about price increases, as the value of currency decreases with inflation.

What happens to the value of the dollar when the price of goods increases, such as a bottle of water going from $1.00 to $2.00?

• The value of the dollar increases

• The value of the dollar stays the same

• The value of the dollar falls

• The price of the dollar is not related to the price of goods

Answer explanation

When the price of goods increases, it means that more dollars are needed to purchase the same item, indicating a decrease in the value of the dollar.

What is inflation?

• A decrease in the general price level of goods and services

• A general and sustained increase in prices

• The interest rate set by the central bank

• The total amount of money in circulation within an economy

Answer explanation

Inflation is a general and sustained increase in prices, making it the correct choice among the options provided.

Tags

9.A

How is the inflation rate defined?

• The total amount of goods produced in a year

• The percentage increase in the money supply

• The percentage change in the price level from the previous period or base year

• The percentage change in employment rates

Answer explanation

The inflation rate is defined as the percentage change in the price level from the previous period or base year, not the total amount of goods produced, the increase in money supply, or the change in employment rates.

Tags

9.A

What is considered a normal or "healthy" inflation rate?

• About 1-2%

• About 2-3%

• About 4-5%

• About 5-6%

Answer explanation

A normal or 'healthy' inflation rate is considered to be about 2-3%.

What is hyperinflation?

• A moderate increase in prices

• A rapid increase in prices that is out of control

• A decrease in the rate of inflation

• A sustained drop in the price levels

Answer explanation

Hyperinflation refers to a rapid increase in prices that is out of control, making it the correct choice.

What does disinflation refer to?

• A rapid increase in prices

• A sustained drop in the price levels

• A decrease in the rate of inflation

• A combined rise in prices with a slowdown in the economy

Answer explanation

Disinflation refers to a decrease in the rate of inflation, not a rapid increase in prices, sustained drop in price levels, or a combined rise in prices with a slowdown in the economy.

What does stagflation describe?

• A rapid increase in prices

• A decrease in the rate of inflation

• A sustained drop in the price levels

• A combined rise in prices with a slowdown in the economy

Answer explanation

Stagflation describes a combined rise in prices with a slowdown in the economy, making it the correct choice.