Inflation

What does inflation refer to?

• Decrease in prices of goods and services

• No impact on prices of goods and services

• Stable prices of goods and services

• Overall increase in prices of goods and services

How is the inflation rate calculated using the Consumer Price Index (CPI)?

• CPI at time t – CPI at time t- 1/CPI at time t- 1 x 100/1

• CPI at time t + 1 – CPI at time t + 1

• CPI at time t – CPI at time t + 1

• CPI at time t + 1 – CPI at time t

Who is likely to gain from inflation according to the text?

• Lenders

• Borrowers

• Fixed income earners

• Savers

What is hyperinflation?

• Low inflation rate

• Moderate inflation rate

• High inflation rate

• Stable inflation rate

What is demand-pull inflation driven by?

• Lower spending

• Stable spending

• No impact on spending

• Higher spending

What causes cost-push inflation?

• Increase in prices of inputs

• Decrease in world price of imported goods

• Decrease in exchange rate

• Decrease in wages

How can the government address inflation according to the text?

• Increase wages for all workers

• No government intervention

• Decrease government spending and money supply

• Increase government spending and money supply

What is the impact of inflation on savers?

• They gain from inflation

• They lose from inflation

• No impact on savers

• They are not affected by inflation

What is the Consumer Price Index (CPI) used for?

• Predicting stock market trends

• Measuring unemployment rate

• Estimating inflation rate

• Calculating GDP

What happens to fixed income earners during inflation?

• Their income increases

• Their income remains the same

• They lose purchasing power

• They gain purchasing power