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WorksheetsConsequences of inflation
Total questions: 28
Worksheet time: 14mins
What is the main problem with inflation that countries have faced over the past 50 years?
Stagnant economic growth
Deflation
Low rates of inflation
High rates of inflation
What is the main cause of falling prices in Japan between 1995 and 2014?
Low demand
Global commodity prices
High demand
Government intervention
What is the real cost of borrowing if prices fall by 2% and the nominal interest rate is 1%?
1%
4%
2%
3%
What is the main problem with deflation?
Increased consumer spending
Negative impact on borrowing and spending
Rising asset values
Stable national income
What is the target for inflation set by many central banks today?
4%
3%
2%
1%
What is the effect of a rise in producer price index in China on the consumer price index?
No effect
Immediate rise
Delayed rise
Immediate fall
What is the main cause of the fall in inflationary pressures across most OECD member countries?
Government intervention
Weak demand
Strong demand
Rising energy costs
What is the impact of falling prices on consumer and business confidence?
Boosts confidence
Reduces confidence
Unpredictable impact
No impact
What is the likely effect of deflation on national income?
No impact
Stability
Decrease
Increase
What is the term for increases in prices that economic actors are able to predict with accuracy?
Hyperinflation
Unanticipated inflation
Disinflation
Anticipated inflation
What is the average price of goods and services in the economy called?
Inflation rate
Price level
Producer price index
Consumer price index
What is the effect of inflation on income distribution?
Stabilizes income distribution
No impact on income distribution
Increases income inequality
Redistributes income and wealth
What is the likely impact of inflation on the current account on the balance of payments?
Improvement
Deterioration
Stability
No impact
What are deflation and disinflation?
Deflation is a fall in the price level, disinflation is a fall in the rate of inflation
Deflation is a rise in the price level, disinflation is a rise in the rate of inflation
Both are types of inflation
Both are types of deflation
What is the impact of deflation on the real value of debt?
Increases the real value of debt
Decreases the real value of debt
No impact on the real value of debt
Stabilizes the real value of debt
What is the main cause of deflation in an economy?
High demand
Low demand
Government intervention
Rising energy costs
What are the effects of inflation on fixed-income earners?
An increase in their standard of living
A reduction in their standard of living
An increase in the purchasing power of their fixed income
No effect on their standard of living
How does inflation affect savings?
Inflation increases the real value of money saved
Inflation only affects spending, not savings
Inflation has no impact on savings
Inflation reduces the real value of money saved
What happens to investment during inflation?
Inflation causes the value of money to remain the same
Inflation can negatively impact the returns on investments
Investment increases during inflation
Inflation has no impact on investments
What is the relationship between inflation and unemployment?
There is no relationship between inflation and unemployment
Inflation and unemployment always move in the same direction
Inflation has no impact on unemployment
When inflation is high, unemployment tends to be low, and vice versa
How does inflation impact fixed-income earners?
Inflation increases the value of fixed-income for earners
Inflation has no impact on fixed-income earners
Inflation only impacts variable-income earners
Inflation erodes the purchasing power of fixed-income earners
What is the effect of inflation on investment returns?
Inflation has no effect on investment returns
Inflation increases the real value of investment returns
Inflation only affects short-term investment returns
Inflation reduces the real value of investment returns, leading to lower purchasing power
How does inflation impact unemployment?
Inflation can lead to higher unemployment
Inflation causes unemployment to decrease as businesses reduce production costs
Inflation has no impact on unemployment
Inflation leads to lower unemployment by increasing consumer spending
What is the consequence of inflation on fixed-income earners?
No impact on the purchasing power of their fixed income
A decrease in the purchasing power of their fixed income
A decrease in the cost of goods and services
An increase in the purchasing power of their fixed income
What happens to the value of savings during inflation?
The value of savings fluctuates randomly during inflation.
The value of savings decreases during inflation as the purchasing power of money decreases
The value of savings increases during inflation as the purchasing power of money increases.
The value of savings remains the same during inflation.
What is the impact of deflation on unemployment?
Deflation has no impact on unemployment
Deflation always leads to an increase in unemployment
Deflation can lead to lower unemployment
Deflation leads to higher unemployment by reducing consumer spending
How does deflation affect savings?
Deflation increases the real value of money saved
Deflation only affects spending, not savings
Deflation has no impact on savings
Deflation increases the purchasing power of savings over time, increasing the real value of money saved
What happens to investment during deflation?
Deflation causes the value of money to remain the same
Lower interest rates and increased purchasing power
Investment decreases during deflation
Deflation has no impact on investments
