Understanding Economic Concepts

Define Deflation

• Deflation is the increase in the general price level of goods and services.

• Indicators include rising consumer prices, increasing wages, and growing demand.

• Inflation is the increase in the general price level of goods and services.

• Deflation is the decrease in the general price level of goods and services.

What are the potential causes of deflation?

• Higher wages for workers

• Decreased demand, increased productivity, reduced consumer spending, financial crises.

• Expansionary fiscal policies

• Increased consumer confidence

Explain the impact of deflation on consumer behavior.

• Deflation has no effect on consumer purchasing decisions.

• Deflation causes consumers to delay purchases, reducing demand and slowing economic activity.

• Consumers tend to buy more luxury items during deflation.

• Deflation leads to increased consumer spending and higher demand.

Define Cost-push Inflation

• An increase in government subsidies resulting in lower production costs.

• A rise in technology leading to cheaper manufacturing processes.

• Cost-push inflation is a type of inflation that occurs when the cost of production increases, leading to higher prices for goods and services. This type of inflation can be caused by a variety of factors, such as an increase in the cost of raw materials, a rise in labor costs, or an increase in taxes.

• A decrease in consumer demand leading to lower prices for goods.

What are the effects of cost-push inflation on the economy?

• Cost-push inflation leads to increased wages and job creation.

• Cost-push inflation leads to higher prices, reduced consumer spending, increased unemployment, and potential economic stagnation.

• Cost-push inflation has no impact on the economy.

• Cost-push inflation decreases prices and boosts consumer spending.

How does cost-push inflation differ from demand-pull inflation?

• Cost-push inflation is caused by rising production costs, while demand-pull inflation is caused by increasing demand.

• Cost-push inflation is caused by increased consumer spending, while demand-pull inflation is caused by decreasing demand.

• Demand-pull inflation results from higher production costs.

• Cost-push inflation occurs when the government increases taxes.

Describe the Decision Making Process in economics.

• Ignoring the problem and making a random choice

• Only considering the first alternative without evaluation

• Implementing a decision without any prior information gathering

• The decision-making process in economics includes identifying a problem, gathering information, evaluating alternatives, making a choice, and implementing the decision.

What role does information play in the Decision Making Process?

• Information complicates the decision-making process.

• Information is irrelevant to decision making.

• Information is crucial for evaluating options and making informed decisions.

• Decisions are made solely based on intuition.

Explain how opportunity cost is considered in decision making.

• Opportunity cost is the amount of money spent on the chosen option.

• Opportunity cost is the total cost of all alternatives considered.

• Opportunity cost is the value of the next best alternative forgone in decision making.

• Opportunity cost is the time taken to make a decision.

What are the steps involved in making an economic decision?

• Ignore the problem and proceed with a decision

• Only consider the opinions of friends and family

• Identify the problem, gather information, evaluate alternatives, consider costs and benefits, make the decision, review the outcome.

• Make a decision based on gut feeling alone