DP1 Inflation

1. What is inflation?

• A decrease in the general price level of goods and services
• A decrease in the value of money
• An increase in the general price level of goods and services
• An increase in the value of money

2. What index is commonly used to measure inflation?

• GDP Deflator
• Consumer Price Index (CPI)
• Producer Price Index (PPI)
• Balanced Price Index (BPI)

3. Which of the following is a cost of high inflation?

• Increased savings
• Reduced uncertainty
• Redistribution of wealth
• More stable prices

4. How does high inflation affect export competitiveness?

• Makes domestic goods cheaper for foreign buyers
• Reduces the quality of goods
• Makes domestic goods more expensive for foreign buyers
• Increases export volume

5. What is disinflation?

• Prices decreasing
• Prices increasing at a faster rate
• Prices increasing at a slower rate
• Stabilization of prices

6. What does deflation refer to?

• A rapid increase in prices
• A slow increase in prices
• A decrease in the general price level of goods and services
• A stabilization in the price level

7. Which scenario could lead to deflation?

• Increase in aggregate demand
• Decrease in aggregate demand
• Stable aggregate supply
• Increase in money supply

8. Deflation often leads to:

• Higher spending by consumers
• Delayed purchases by consumers
• Increased investment by businesses
• More rapid economic growth

9. What effect does high inflation have on the real value of savings?

• Increases it significantly
• No effect
• Erodes it
• Doubles its value

10. Which of the following describes a potential cause of deflation?

• Increase in short-run aggregate supply
• Decrease in money supply
• Poor fiscal policies
• Increased taxation