Inflation

What does "Cost of Living" refer to?

• The cost of luxury items and services

• The cost of maintaining a certain standard of living

• The cost of entertainment and leisure activities

• The cost of transportation only

Answer explanation

Cost of Living refers to the cost of maintaining a certain standard of living, encompassing expenses like housing, food, healthcare, and other necessities to sustain a particular lifestyle.

What has caused the value of the penny to fall over the years?

• Deflation

• Stock market crashes

• Inflation

• Increased production costs

Answer explanation

The value of the penny has fallen over the years due to inflation, which reduces the purchasing power of the currency.

Inflation is just as much about the value of currency as it is about what?

• Historical events

• Price increases

• Government policies

• Exchange rates

Answer explanation

Inflation is primarily about the increase in prices of goods and services, reflecting the decrease in the purchasing power of a currency.

What is inflation?

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

• A general and sustained increase in prices

• A one-time increase in the price of a specific product

• The interest rate set by the central bank

Answer explanation

Inflation is a general and sustained increase in prices, leading to a decrease in the purchasing power of a currency over time.

What does the inflation rate represent?

• The total amount of money in circulation

• The percentage change in the price level from the previous year

• The percentage of people unemployed

• The growth rate of the economy

Answer explanation

The inflation rate represents the percentage change in the price level from the previous year, indicating the rate at which prices are rising in the economy.

What term is used to describe a rapid increase in prices that is out of control?

• Deflation

• Disinflation

• Stagflation

• Hyperinflation

Answer explanation

Hyperinflation is the term used to describe a rapid increase in prices that is out of control, leading to a loss of confidence in the currency.

What does disinflation refer to?

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

• 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

Disinflation refers to a decrease in the rate of inflation, indicating a slowdown in the rate at which prices are rising.

What is deflation?

• A decrease in the rate of inflation

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

• A sustained drop in the price levels

• A rapid increase in prices that is out of control

Answer explanation

Deflation is a sustained drop in the price levels, making goods and services cheaper over time.

Stagflation is characterized by which of the following?

• A decrease in the rate of inflation

• A sustained drop in the price levels

• A rapid increase in prices that is out of control

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

Answer explanation

Stagflation is characterized by a combined rise in prices with a slowdown in the economy.

What is the Quantity Theory in the context of inflation?

• The theory that inflation is caused by a decrease in the money supply

• The theory that inflation is caused by too much money in the economy

• The theory that inflation is unrelated to the money supply

• The theory that inflation is caused by government regulation

Answer explanation

The Quantity Theory of inflation states that inflation is caused by too much money in the economy, leading to an increase in prices.