Inflation Insights

Explain the difference between demand-pull and cost-push inflation.

• Demand-pull inflation is caused by reduced demand, while cost-push inflation is caused by decreased production costs.

• Demand-pull inflation is driven by decreased production costs, while cost-push inflation is driven by reduced demand.

• Demand-pull inflation results from increased production costs, while cost-push inflation results from excess demand.

• Demand-pull inflation is driven by excess demand, while cost-push inflation is driven by increased production costs.

How does inflation impact the purchasing power of consumers?

• Inflation has no impact on purchasing power

• Inflation increases the purchasing power of consumers

• Inflation decreases the purchasing power of consumers.

• Inflation only impacts businesses, not consumers

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

• To track changes in weather patterns

• To track changes in prices of goods and services commonly purchased by households.

• To monitor changes in population growth

• To measure changes in stock market prices

Discuss one method that governments can use to control inflation.

• Increasing government spending

• Reducing taxes

• Increasing interest rates

• Printing more money

Name one factor that can lead to demand-pull inflation.

• Increase in consumer spending

• Decrease in government spending

• Rise in interest rates

• Increase in unemployment rate

How does inflation affect savings and investments?

• Inflation has no impact on savings and investments.

• Inflation stabilizes the value of savings and investments.

• Inflation increases the value of savings and investments over time.

• Inflation reduces the value of savings and investments over time.

What role does the central bank play in managing inflation?

• The central bank manages foreign exchange rates

• The central bank adjusts interest rates, controls the money supply

• The central bank sets fiscal policy

• The central bank regulates the stock market

Describe the impact of inflation on fixed-income individuals.

• Inflation only affects variable incomes

• Inflation reduces the real value of fixed incomes over time.

• Inflation has no impact on fixed-income individuals

• Inflation increases the real value of fixed incomes over time

What is the relationship between inflation and unemployment?

• Inflation and unemployment are completely unrelated economic factors.

• Unemployment has no impact on inflation, and vice versa.

• The relationship between inflation and unemployment is described by the Phillips curve, showing a trade-off where as inflation increases, unemployment decreases and vice versa.

• They both increase or decrease together.

What is the Producer Price Index (PPI) used for in measuring inflation?

• Measuring the average change in selling prices received by domestic producers for their output.

• Measuring the average change in consumer prices for goods and services

• Calculating the unemployment rate in a country

• Determining the Gross Domestic Product (GDP) growth rate