Inflation Worksheet

Inflation is defined as a sustained decrease in the general price level of goods and services in an economy.

• True

• False

Which of the following is NOT typically considered a main type of inflation?

• Demand-pull inflation

• Cost-push inflation

• Hyperinflation

• Deflationary spiral

Cost-push inflation primarily arises from:

• An increase in aggregate demand.

• A decrease in the money supply.

• An increase in the costs of production for firms.

• Increased consumer confidence.

A significant increase in consumer spending, leading to shortages of goods and services, is a key characteristic of:

• Cost-push inflation.

• Demand-pull inflation.

• Stagflation.

• Disinflation.

A decrease in wages for workers would likely contribute to cost-push inflation.

• True

• False

Which of the following is a potential effect of cost-push inflation on the economy?

• Increased economic growth.

• Higher unemployment due to reduced production.

• Lower interest rates.

• Increased consumer purchasing power.

Demand-pull inflation occurs when:

• Businesses reduce their investment spending.

• Aggregate supply exceeds aggregate demand.

• There is "too much money chasing too few goods.","The government decreases taxes significantly.

An increase in government spending can be a contributing factor to demand-pull inflation.

• True

• False

The primary difference between cost-push and demand-pull inflation lies in:

• The magnitude of the price increase.

• The sector of the economy most affected.

• The initial cause of the inflationary pressure.

• The duration of the inflationary period.

Imagine a scenario where a major oil-producing nation suddenly cuts its production, leading to a sharp increase in energy prices. This situation is most likely an example of:

• Demand-pull inflation.

• Cost-push inflation.

• Deflation.

• Stagflation.