Understanding Inflation

What is one of the main reasons prices increase over time?

• Higher production costs

• Lower production costs

• Increase in supply

• Decrease in demand

How can a small amount of inflation benefit the economy?

• By reducing consumer spending

• By encouraging people to save more

• By promoting spending and investment

• By decreasing job opportunities

What is the Consumer Price Index (CPI) used for?

• To measure the stock market performance

• To track changes in the prices of a typical basket of goods and services

• To calculate the national debt

• To determine interest rates

Who might be negatively affected by rising prices due to inflation?

• People with fixed incomes

• People with investments

• People with variable rate loans

• People with high-yield savings accounts

What is demand-pull inflation?

• When the government reduces taxes

• When production costs decrease

• When interest rates are high

• When there is too much money chasing too few goods

How do central banks control inflation?

• By reducing government spending

• By increasing taxes

• By adjusting interest rates

• By printing more money

What is a good strategy to protect your savings from inflation?

• Keeping money in a regular savings account

• Avoiding any form of investment

• Investing in high-yield savings accounts or CDs

• Spending all your money quickly

How can inflation affect your debts if you have a fixed-rate loan?

• It increases the amount you owe

• It decreases the value of the money you pay back

• It makes your payments variable

• It has no effect on your debts

What should you do if you notice the cost of something you buy regularly is increasing?

• Stop buying the item altogether

• Consider it a sign of rising inflation

• Assume it's a temporary change

• Ignore it

Why is it important to stay informed about inflation and interest rates?

• To make better financial decisions

• To reduce your income

• To ignore economic changes

• To avoid investing