ML FBLA Exploring Economics - Inflation

What is inflation?

• The increase in the supply of money in an economy

• The rise in the general level of prices of goods and services over time

• The increase in employment rates

• The decrease in the supply of goods and services

Which of the following is a common cause of inflation?

• Increased demand for goods and services

• A decrease in the money supply

• A decrease in demand for goods and services

• Lower consumer spending

What happens to the value of money during inflation?

• It increases

• It stays the same

• It decreases

• It fluctuates unpredictably

Which of the following is an example of demand-pull inflation?

• Prices rise because consumers have more money to spend

• Prices rise because the supply of goods decreases

• Prices rise because the government reduces the money supply

• Prices rise due to higher production costs

Which of the following could be a result of high inflation?

• Increased savings

• Increased consumer purchasing power

• Decreased purchasing power of money

• Lower unemployment rates

What is the Consumer Price Index (CPI)?

• A measure of the total output of goods and services in an economy

• A measure of changes in the prices paid by consumers for goods and services

• A tool used to calculate GDP

• A list of the most commonly traded goods

What is hyperinflation?

• A mild increase in prices

• A period of very high and typically accelerating inflation

• A decrease in the cost of living

• A stable, low rate of inflation

Which of the following could cause cost-push inflation?

• Rising wages and production costs

• Lower interest rates

• An increase in the demand for products

• Government tax cuts

What is the main difference between demand-pull inflation and cost-push inflation?

• Demand-pull inflation happens when supply decreases, while cost-push inflation happens when demand decreases

• Demand-pull inflation happens when demand increases, while cost-push inflation happens when supply decreases

• Demand-pull inflation is caused by rising wages, while cost-push inflation is caused by falling wages

• Demand-pull inflation only happens in recessions, while cost-push inflation only happens in expansions

How does inflation impact fixed-income earners, such as retirees?

• Their purchasing power decreases

• Their income increases

• Their savings increase

• They are unaffected by inflation