This quiz works best with JavaScript enabled. Home > Finance > Economics > Macroeconomics > Inflation And Deflation > Inflation And Deflation – Quiz 10 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation And Deflation Quiz 10 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. High inflation is good for the economy. A) False. B) True. Show Answer Correct Answer: A) False. 2. What is a cause of demand-pull inflation? A) Reduction on business investments. B) Rise in import spending. C) Fall in aggregate demand. D) Rise in consumer spending. Show Answer Correct Answer: D) Rise in consumer spending. 3. What is it called when magma pressurizes and fills a magma chamber? A) Subduction. B) Inflation. C) Eruption. D) Collision. Show Answer Correct Answer: B) Inflation. 4. In which year did the French occupy (take over) the area of the Ruhr? A) 1920. B) 1923. C) 1921. D) 1922. Show Answer Correct Answer: B) 1923. 5. What is the purpose of the Consumer Price Index (CPI)? A) The purpose of the Consumer Price Index (CPI) is to measure changes in the population growth rate over time. B) The purpose of the Consumer Price Index (CPI) is to measure changes in the average price level of goods and services purchased by households over time. C) The purpose of the Consumer Price Index (CPI) is to measure changes in the average wage level of workers over time. D) The purpose of the Consumer Price Index (CPI) is to measure changes in the stock market index over time. Show Answer Correct Answer: B) The purpose of the Consumer Price Index (CPI) is to measure changes in the average price level of goods and services purchased by households over time. 6. What are the three ways governments can contral inflation? A) Monetary Policy, Fiscal Policy, Exchange Rates. B) Fiscal Policy, Supply and Demand. C) Monetary Policy, Supply and Demand. D) None of above. Show Answer Correct Answer: A) Monetary Policy, Fiscal Policy, Exchange Rates. 7. What is a countermeasure to combat deflation? A) Interest rate increase. B) Interest rate cut. C) Close the borders to neighboring countries. D) Keep interest rates at the same level. Show Answer Correct Answer: B) Interest rate cut. 8. What is the effect of inflation on investment returns? A) Inflation only affects short-term investment returns. B) Inflation has no effect on investment returns. C) Inflation increases the real value of investment returns. D) Inflation reduces the real value of investment returns, leading to lower purchasing power. Show Answer Correct Answer: D) Inflation reduces the real value of investment returns, leading to lower purchasing power. 9. Deflation (when prices go down) is good for the economy. A) True. B) False. Show Answer Correct Answer: B) False. 10. Which out of the following is phenomenon that leads to Deflation? A) It is a decrease in the rate of inflation-a slowdown in the rate of increase of the general price level of goods and services. B) It is a situation of persistent rise in inflation along with dip in growth and increase in unemployment. C) It is the situation where prices fall continuously or have tendency to fall. D) It represents price rise in all goods and services but does not include articles from food and energy sector. Show Answer Correct Answer: C) It is the situation where prices fall continuously or have tendency to fall. 11. A high rate of inflation is likely to have all of the effects listed below except A) Uncertainty for business. B) Efficiency losses. C) Greater export competitiveness. D) Reduced saving. Show Answer Correct Answer: C) Greater export competitiveness. 12. You can represent cost-push inflation in a diagram through ..... A) An inward shift of SRAS. B) An inward shift of AD. C) An outward shift of AD. D) An outward shift of SRAS. Show Answer Correct Answer: A) An inward shift of SRAS. 13. Which of the following is NOT a reason why deflation rarely happens? A) The fear of price wars. B) Firms cannot reduce their unit costs. C) Firms try to avoid additional menu costs. D) The inflexibility of wages. Show Answer Correct Answer: B) Firms cannot reduce their unit costs. 14. What happens to the volcano's slope after an eruption? A) It stays the same. B) It increases. C) It decreases. D) None of above. Show Answer Correct Answer: C) It decreases. 15. What is the main problem with inflation that countries have faced over the past 50 years? A) Low rates of inflation. B) Deflation. C) High rates of inflation. D) Stagnant economic growth. Show Answer Correct Answer: C) High rates of inflation. 16. In the short run, attempting to reduce inflation can lead to what effect? A) A reduction in real GDP. B) A recession or slower economy. C) Higher unemployment. D) All of the above. Show Answer Correct Answer: D) All of the above. 17. Which is the correct term for a fall in the rate of inflation? A) Disinflation. B) Reflation. C) Stagflation. D) Deflation. Show Answer Correct Answer: A) Disinflation. 18. What happens to the inflation rate when unemployment goes up? A) Inflation rate rises. B) Inflation rate falls and we have deflation. C) Inflation rate stays the same. D) None of above. Show Answer Correct Answer: B) Inflation rate falls and we have deflation. 19. When demand-pull inflation occurs which way does the aggregate demand [AD] curve shift? A) It doesn't shift. B) It shifts to the right [upwards]. C) It shifts to the left [downwards]. D) None of above. Show Answer Correct Answer: B) It shifts to the right [upwards]. 20. In the CPI:Food is weighted at 40%Non-Food is weighted at 60% If the price of Food rises by 5% and the price of Non-Food rises by 10%, what is that CPI rate of inflation? A) 8%. B) 15%. C) 6%. D) 7%. Show Answer Correct Answer: A) 8%. 21. Which term describes the rate at which money value decreases and/or prices increase? A) Economics. B) Deflation. C) Inflation. D) None of these answers are correct. Show Answer Correct Answer: C) Inflation. 22. How does deflation affect savings? A) Deflation has no impact on savings. B) Deflation increases the purchasing power of savings over time, increasing the real value of money saved. C) Deflation increases the real value of money saved. D) Deflation only affects spending, not savings. Show Answer Correct Answer: C) Deflation increases the real value of money saved. 23. Old people are more likely than young people to talk about prices these days because ..... A) They have experienced the long term effects of inflation. B) They can't figure out how to use their phones. C) The forget how much they used to make. D) They don't remember new stuff. Show Answer Correct Answer: A) They have experienced the long term effects of inflation. 24. Which effect of inflation is described as redistributive? A) The improvement in the terms of trade. B) The loss of purchasing power of people on fixed incomes tagsInflation, Deflation, Disinflation. C) The increased reluctance of people to hold money. D) The inconvenience of frequently changing prices. Show Answer Correct Answer: B) The loss of purchasing power of people on fixed incomes tagsInflation, Deflation, Disinflation. 25. If you expect inflation to increase to 9% next year, which of the following investment strategies should you select to protect yourself against inflation? A) You should buy government bonds at an interest rate of 3.48%. B) You should place your money in a savings account with a fixed 1% interest rate. C) You should buy TIPS (Treasury Inflation Protected Securities) which will increase at the rate of inflation. D) None of above. Show Answer Correct Answer: C) You should buy TIPS (Treasury Inflation Protected Securities) which will increase at the rate of inflation. 26. What is the impact of falling prices on consumer and business confidence? A) Boosts confidence. B) Reduces confidence. C) No impact. D) Unpredictable impact. Show Answer Correct Answer: B) Reduces confidence. 27. What are some economic indicators used to measure inflation? A) Interest rates. B) Stock market performance. C) Consumer Price Index (CPI), Producer Price Index (PPI), GDP deflator. D) Unemployment rate. Show Answer Correct Answer: C) Consumer Price Index (CPI), Producer Price Index (PPI), GDP deflator. 28. Deflation may be a more serious problem than inflation because it may lead to A) A deflationary spiral. B) A serious demand-deficient unemployment. C) A banking crisis. D) All of the above. Show Answer Correct Answer: D) All of the above. 29. 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) 10%. C) 105%. D) -5%. Show Answer Correct Answer: A) 5%. 30. 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. ← 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