Price Stability

What is the primary goal of maintaining price stability in an economy?

• To increase consumer spending

• To avoid price fluctuations in the price level

• To maximize government revenue

• To decrease the unemployment rate

How would you define inflation in the context of an economy?

• A temporary decrease in prices

• A sustained increase in an economy's price level over time

• A sudden drop in consumer demand

• A consistent decrease in the money supply

Which of the following best describes deflation?

• A sustained increase in the price level

• A decrease in the general price level of goods and services

• A temporary increase in prices

• An increase in consumer spending

Disinflation refers to:

• A negative rate of inflation

• A reduction in the rate of inflation

• An increase in the money supply

• A complete halt in inflation

What does a 6% inflation rate indicate about the economy's price level?

• Prices have decreased by 6% compared to the previous year

• Prices have remained stable

• Prices are slightly higher by 6% compared to the previous year

• Prices have increased by 12% over the last two years

Which of the following is a common difficulty in calculating the Consumer Price Index (CPI)?

• Accurately measuring consumer preferences

• Accounting for changes in product quality

Demand-pull inflation occurs when:

• Aggregate demand exceeds aggregate supply

• Aggregate supply exceeds aggregate demand

• The government increases taxes

• There is a technological advancement

Cost-push inflation is primarily caused by:

• An increase in consumer demand

• A decrease in production costs

• An increase in the costs of production

• A decrease in the money supply

How can inflation impact borrowers and lenders differently?

• Borrowers benefit, while lenders lose due to the decreased value of money

• Lenders benefit, while borrowers lose due to the increased value of money

• Both borrowers and lenders benefit equally

• Both borrowers and lenders are negatively impacted

Which type of inflation is characterized by a rapid and uncontrollable increase in prices?

• Hyperinflation

• Stagflation

• Deflation

• Disinflation