This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Inflation And Deflation > Inflation And Deflation – Quiz 12 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation And Deflation Quiz 12 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What is the main cause of the fall in inflationary pressures across most OECD member countries? A) Government intervention. B) Weak demand. C) Strong demand. D) Rising energy costs. Show Answer Correct Answer: B) Weak demand. 2. Deflation results from ..... the money supply at too rapid a rate for a sustained period of time A) Increasing. B) Decreasing. Show Answer Correct Answer: B) Decreasing. 3. When you compare the price of shoes between now and 20 years from now, you are ..... A) Telling what would happen if you bought shoes now and saved them for 20 years and then sold them. B) Looking at the price of a pair of shoes now and the price you would expect to pay for the same level of shoes in 20 years. Show Answer Correct Answer: B) Looking at the price of a pair of shoes now and the price you would expect to pay for the same level of shoes in 20 years. 4. Why was the Ruhr district of Germany so important? A) It was a massive iron producing district. B) It was a massive water producing district. C) It was a massive mineral producing district. D) It was a massive coal producing district. Show Answer Correct Answer: D) It was a massive coal producing district. 5. CPI index for 2016 and 2017 was 125 and 120 respectively. Based on the information provided, between 2016 and 2017 A) Price increased by 4%. B) Price decreased by 4%. C) Price increased by 5%. D) Price decreased by 5%. Show Answer Correct Answer: B) Price decreased by 4%. 6. Unexpected inflation will benefit banks and other lenders A) True. B) False. Show Answer Correct Answer: B) False. 7. A government reduces the interest rate to encourage economic growth.Which other aim of government policy might now become more difficult to achieve? A) Reducing a balance of trade in goods surplus. B) Reducing a government budget deficit. C) Reducing the level of unemployment. D) Reducing the rate of inflation. Show Answer Correct Answer: D) Reducing the rate of inflation. 8. The salary for a nurse increases from £20000 to £22000. During this period there is inflation of 14%. What is the percentage change in the nurse's real income A) 10%. B) 9%. C) 4%. D) -4%. Show Answer Correct Answer: D) -4%. 9. Explain why a high inflation rate triggers an increase in interest rates? A) Interest rates are raised to attract domestic deposit in the face of a rapidly growing economy. B) Interest rates are raised to discourage domestic credit consumption. C) Interest rates are raised to improve the purchasing power of the domestic currency. D) Interest rates are raised to attract cheaper foreign imports in the face of lower domestic production. Show Answer Correct Answer: A) Interest rates are raised to attract domestic deposit in the face of a rapidly growing economy. 10. What did many rich and middle class people lose because of the hyper-inflation? A) Their bank savings. B) Their wallets. C) Their bread. D) Their job. Show Answer Correct Answer: A) Their bank savings. 11. Exchange rate depreciation puts ..... A) Upward pressure on inflation. B) Downward pressure on inflation. Show Answer Correct Answer: A) Upward pressure on inflation. 12. Which of the following is a possible cause of demand-pull inflation? A) An increase in government expenditure. B) An increase in the price of oil. C) A rise in wages. D) A rise in imports. Show Answer Correct Answer: A) An increase in government expenditure. 13. What are deflation and disinflation? A) Deflation is a fall in the price level, disinflation is a fall in the rate of inflation. B) Deflation is a rise in the price level, disinflation is a rise in the rate of inflation. C) Both are types of inflation. D) Both are types of deflation. Show Answer Correct Answer: A) Deflation is a fall in the price level, disinflation is a fall in the rate of inflation. 14. Governments aim to encourage stable prices because inflation can result in a current account deficit on the balance of payments. How does high inflation contribute to a current account deficit? A) Countries have to barter manufactured goods for raw materials. B) Goods manufactured for export lose their competitiveness. C) Numbers of foreign visitors increase. D) Spending on imported goods is reduced. Show Answer Correct Answer: B) Goods manufactured for export lose their competitiveness. 15. When a company has to pay workers higher wages, it can lead to a rise in prices for their product. This is known as ..... A) Demand pull inflation. B) Wage price spiral. C) Cyclical unemployment. D) Deflation. Show Answer Correct Answer: B) Wage price spiral. 16. If CPI goes from 100 to 300 and your salary goes from £100, 000 to £200, 000, what happened to your purchasing power? A) No change. B) Increases. C) Decreases. D) None of above. Show Answer Correct Answer: C) Decreases. 17. Simon borrowed R10 000 from the bank at the end of 2011 at a fixed interest rate of 20%. At the end of 2012, the inflation rate was 25%. Inflation has been ..... to Simon; the real value of his loan plus interest payments changed to ..... A) Beneficial; R9 600. B) Beneficial; R4 800. C) Beneficial; R8 000. D) Costly; R10500. Show Answer Correct Answer: A) Beneficial; R9 600. 18. The CPI for All Urban Consumers in the US was 258.83 for January 2020 and 270.97 for January 2021 (at the time of writing). What was the inflation rate? A) 4.7%. B) 7.8%. C) 12.14%. D) 46.90%. Show Answer Correct Answer: A) 4.7%. 19. The price level in an economy is estimated to be £520 in 2016. By 2017, it has increased to £535.60. Which of the following statements is true? A) The real value of money has increased. B) The rate of inflation is £15.60. C) All prices in the economy have risen. D) The rate of inflation is 3%. Show Answer Correct Answer: D) The rate of inflation is 3%. 20. A small level of inflation is good for the economy. A) True. B) False. Show Answer Correct Answer: A) True. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesInflation And Deflation Quiz 1Inflation And Deflation Quiz 2Inflation And Deflation Quiz 3Inflation And Deflation Quiz 4Inflation And Deflation Quiz 5Inflation And Deflation Quiz 6Inflation And Deflation Quiz 7Inflation And Deflation Quiz 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books