Economics Quiz

What happens to the value of currency when the money supply grows too large relative to the size of the economy?

• The value of the currency increases

• The value of the currency decreases

• The value of the currency remains the same

• The value of the currency becomes unpredictable

What can supply shocks, such as natural disasters or high oil prices, lead to?

• Decreased demand

• Lower prices

• Reduced supply and higher prices

• Increased production

What occurs when demand for goods and services exceeds the economy's ability to produce them?

• Lower prices

• Higher prices

• Stable prices

• Decreased demand

What is cost-push inflation?

• When the cost of producing goods and services decreases

• When businesses lower their prices

• When the cost of producing goods and services increases, businesses raise their prices

• When demand for goods decreases

What is built-in inflation also known as?

• Demand-pull inflation

• Wage-price spiral

• Cost-push inflation

• Supply shock

What causes businesses to raise prices in a wage-price spiral?

• Lower wages

• Higher wages to keep up with rising living costs

• Decreased demand

• Increased supply

What can fiscal and monetary policy cuts lead to?

• Lower interest rates and increased inflation

• Higher interest rates and decreased inflation

• Stable prices

• Decreased demand

What do central banks like the Federal Reserve monitor?

• Employment rates

• Inflation

• Currency exchange rates

• Stock market trends

How do central banks attempt to control inflation?

• By increasing taxes

• By raising interest rates or encouraging/discouraging spending

• By printing more money

• By reducing government spending

What can influence actual prices in the future according to inflation expectations?

• Past inflation rates

• What households and businesses think will happen to prices

• Current stock market trends

• Government policies