This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Inflation And Deflation > Inflation And Deflation – Quiz 16 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation And Deflation Quiz 16 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Price index A) A general increase in prices. B) Income that does not increase even when prices go up. C) A sustained drop in the price of a good. D) A measurment that shows the average cost of goods and services over time. Show Answer Correct Answer: D) A measurment that shows the average cost of goods and services over time. 2. The Consumer Price Index. If the price index is 100 today and 105 in one year's time, what will the inflation rate be? A) 5%. B) -5%. C) 10%. D) 105%. Show Answer Correct Answer: A) 5%. 3. Which explanation best explains the effects of inflation? A) Consumers have more products to choose from. B) Inflation erodes (take away from) the purchasing power of the dollar. C) Inflation results in lower prices. D) Demand increases because prices are higher. Show Answer Correct Answer: B) Inflation erodes (take away from) the purchasing power of the dollar. 4. What is the relationship between inflation and unemployment? A) There is no relationship between inflation and unemployment. B) Inflation and unemployment always move in the same direction. C) Inflation has no impact on unemployment. D) When inflation is high, unemployment tends to be low, and vice versa. Show Answer Correct Answer: D) When inflation is high, unemployment tends to be low, and vice versa. 5. True or false? An expectation of increasing inflation is likely to slow down household consumption. A) True. B) False. Show Answer Correct Answer: B) False. 6. In those countries that do not have well-developed capital markets A) A. inflation is uncommon because they cannot finance budget deficits by issuing bonds. B) B. inflation is uncommon because government expenditures must be financed with taxes and/or user fees. C) C. budget deficits will tend to be inflationary. D) Both (a) and (b) of the above. Show Answer Correct Answer: C) C. budget deficits will tend to be inflationary. 7. In an economically stable country, prices usually ..... A) Fall annually. B) Rise steadily annually. C) Rise rapidly. D) Fall rapidly. Show Answer Correct Answer: B) Rise steadily annually. 8. Economics is a study of choices becausse ..... A) It leads to thebest possible way to avoid inflation in order to bestsatisfy unlimited human needs and wants. B) It leads to thebest possible use of scarce resources in order to bestsatisfy unlimited human needs and wants. C) It leads to thebest possible use of scarce resources in order to bestsave and invest our money. D) None of above. Show Answer Correct Answer: B) It leads to thebest possible use of scarce resources in order to bestsatisfy unlimited human needs and wants. 9. Deflation is uncommon in the real world because A) Wages do not fall easily and firms fear price wars. B) Competitive markets keep prices from falling. C) Governments impose price floors. D) Firms will be unable to sell their products. Show Answer Correct Answer: A) Wages do not fall easily and firms fear price wars. 10. Which of the following economic stages have the lowest inflation? A) Growth. B) Boom. C) Recession. D) Slump. Show Answer Correct Answer: D) Slump. 11. What is the likely effect of deflation on national income? A) No impact. B) Stability. C) Decrease. D) Increase. Show Answer Correct Answer: C) Decrease. 12. What inevitably leads to economic collapse. (a) A) Inflation. B) Recession. C) A hyperinflation. D) Deflation. Show Answer Correct Answer: C) A hyperinflation. 13. Consumer spending increased in 2010.What other economic indicator is most likely to have increased as a result of the rise in consumer spending? A) Government budget deficit. B) Inflation. C) Terms of trade. D) Unemployment. Show Answer Correct Answer: B) Inflation. 14. More expansion of foreign direct investment can boost: A) Unemployment. B) Supply. C) Employment. D) Money circulation. Show Answer Correct Answer: C) Employment. 15. What was Germany no longer able to do by 1923 (and break the agreement of the Treaty of Versailles)? A) Not able to provide coal to Austria. B) Not able to supply coal to Britain. C) Not able to provide coal to France. D) No able to supply coal to Hungary. Show Answer Correct Answer: C) Not able to provide coal to France. 16. Which of the following is TRUE about inflation? A) All price increases are instances of inflation. B) Inflation happens when the money supply shrinks unexpectedly. C) Inflation in the long run typically follows periods of expansion in the money supply. D) Rapid inflation occurs when the Federal Reserve does not create money. Show Answer Correct Answer: C) Inflation in the long run typically follows periods of expansion in the money supply. 17. If money is neutral, A) An increase in the money supply does nothing. B) A change in the money supply only affects real variables such as real output. C) A change in the money supply reduces velocity proportionately; therefore there is no effect on either prices or real output. D) A change in the money supply only affects nominal variables such as prices and wages. E) The money supply cannot be changed because it is tied to a commodity such as gold. Show Answer Correct Answer: D) A change in the money supply only affects nominal variables such as prices and wages. 18. What is a possible long-term result of demand-side deflation? A) Economic boom. B) Recession. C) No long-term impact. D) None of above. Show Answer Correct Answer: B) Recession. 19. Demand-pull inflation often occurs because a government A) Prints too much money. B) Is not printing enough money. C) Is creating too few regulations. D) None of above. Show Answer Correct Answer: A) Prints too much money. 20. Hyperinflation occurs when: A) A country's GDP is increasing at a very high rate. B) A country's prices are increasing at a very high rate. C) A country's productivity is increasing at a very high rate. D) None of above. Show Answer Correct Answer: B) A country's prices are increasing at a very high rate. ← 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