Understanding Inflation and Its Causes

What are the two main factors that cause inflation?

• Decrease in demand and increase in supply

• Decrease in both demand and supply

• Increase in demand and decrease in supply

• Increase in both demand and supply

How does an increase in public expenditure affect demand?

• It decreases the purchasing power of households

• It increases the purchasing power of households

• It has no effect on purchasing power

• It leads to a decrease in demand for goods

What happens when private businesses invest in new enterprises?

• The prices of production factors decrease

• The prices of production factors remain stable

• The demand for goods decreases

• The prices of production factors increase

How does a reduction in taxation influence consumer behavior?

• It leads to a decrease in consumer spending

• It has no effect on disposable income

• It increases disposable income

• It decreases disposable income

What is the effect of increased exports on domestic goods?

• It leads to a decrease in inflation

• It has no effect on domestic goods

• It increases the stock of goods for domestic consumption

• It decreases the stock of goods for domestic consumption

What is deficit financing?

• Spending more than earnings

• Spending without any earnings

• Spending equal to earnings

• Spending less than earnings

How do industrial disputes affect the supply of goods?

• They stabilize the supply of goods

• They decrease the supply of goods

• They have no effect on the supply of goods

• They increase the supply of goods

What happens when there is a shortage of production factors?

• Supply of goods increases

• Supply of goods decreases

• Supply of goods remains unchanged

• Supply of goods becomes unpredictable

How do natural calamities impact agricultural supplies?

• They increase agricultural supplies

• They have no effect on agricultural supplies

• They decrease agricultural supplies

• They stabilize agricultural supplies

What is the result of hoarding goods by traders and consumers?

• It stabilizes demand for goods

• It decreases demand for goods

• It increases demand for goods

• It has no effect on demand for goods