This quiz works best with JavaScript enabled. Home > Finance > Economics > Macroeconomics > Inflation And Deflation > Inflation And Deflation – Quiz 16 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation And Deflation Quiz 16 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. How does inflation affect the purchasing power of money? A) It decreases the purchasing power of money. B) It increases the purchasing power of money. C) It fluctuates the purchasing power of money. D) It has no effect on the purchasing power of money. Show Answer Correct Answer: A) It decreases the purchasing power of money. 2. An increase in aggregate demand may not always lead to demand-pull inflation in A) A monetarist new classical model. B) The long run. C) The Keynesian model. D) The short run. Show Answer Correct Answer: C) The Keynesian model. 3. The ..... measures the price change of a selected group of consumer goods and services overtime A) Consumer Price Index (CPI). B) Bureau of Labor Statistics. C) Gross National Product. D) None of above. Show Answer Correct Answer: A) Consumer Price Index (CPI). 4. Which of the following is NOT a consequence of inflation? A) Reduced export competitiveness. B) A false sense of the value of money. C) Low menu costs. D) High levels of uncertainty. Show Answer Correct Answer: C) Low menu costs. 5. What is an effect of inflation on firms? A) Decreasing labour costs. B) Business uncertainty. C) Increases value of debt. D) Cost of borrowing decreases. Show Answer Correct Answer: B) Business uncertainty. 6. What is the Consumer Price Index (CPI) used for? A) To calculate the rate of inflation. B) To determine the highest grossing movies of all time. C) To adjust prices from the past into today's dollars. D) To measure the overall price levels in a country. Show Answer Correct Answer: A) To calculate the rate of inflation. 7. In the long run, inflation is caused by A) Governments that raise taxes so high that it increases the cost of doing business and, hence, raises prices. B) Banks that have market power and refuse to lend money. C) None of these answers. D) Governments that print too much money. E) Increases in the price of inputs, such as labour and oil. Show Answer Correct Answer: D) Governments that print too much money. 8. Who, among the following, is most likely to benefit during a period of rapid inflation? A) Savers. B) Borrowers. C) Workers in strong unions. D) Pensioners. Show Answer Correct Answer: B) Borrowers. 9. Which of the following is likely to cause supply-side deflation? A) A sudden drop in commodity prices. B) Higher taxes. C) Higher wages. D) Lower direct taxes. Show Answer Correct Answer: A) A sudden drop in commodity prices. 10. Which policy mix is most likely to be effective in the short run for reducing inflation in a closed economy? D A) Increasing the budget surplus (fiscal), increasing the interest rate (monetary). B) Decreasing the budget surplus (fiscal), increasing the money supply (monetary). C) Decreasing the budget surplus (fiscal), increasing the interest rate (monetary). D) Increasing the budget surplus (fiscal), increasing the money supply (monetary) tagsInflation, Deflation, Disinflation. Show Answer Correct Answer: A) Increasing the budget surplus (fiscal), increasing the interest rate (monetary). 11. A representative selection of commonly purchased goods and services used by consumers is called the A) Inflation. B) Market basket. C) Producer price index (PPI). D) Base Year. Show Answer Correct Answer: B) Market basket. 12. True or false? The economy benefits from an inflation rate which is at 0. A) True. B) False. Show Answer Correct Answer: B) False. 13. Which of the following types of inflation interferes with a company's ability to plan for the future? A) Expected inflation. B) Unexpected inflation. C) Creeping inflation. D) Galloping inflation. Show Answer Correct Answer: B) Unexpected inflation. 14. What is the second stage when calculating the price level in the UK? A) Office of National Statistics conducts a price survey to find the maximum price of the 650 most common goods and services. B) Organisation of National Statistics conducts a price survey to find the average price of the 650 most common goods and services. C) Office of National Statistics conducts a price survey to find the average price of the 7000 most common goods and services. D) Office of National Statistics conducts a price survey to find the average price of the 650 most common goods and services. Show Answer Correct Answer: D) Office of National Statistics conducts a price survey to find the average price of the 650 most common goods and services. 15. Who benefits most from deflation? A) Trainees and students. B) Property owner. C) Savings. D) Residents of the capital Berlin. Show Answer Correct Answer: C) Savings. 16. ..... is when prices rise and are pushed up because the cost of resources and labor increases. A) Market Basket. B) Fixed Income. C) Cost-Push Inflation. D) Deflation. Show Answer Correct Answer: C) Cost-Push Inflation. 17. A situation of rising prices resulting from increases in the cost of production. A) Consumer Price Index. B) Cost-push Inflation. C) Demand-pull inflation. D) None of above. Show Answer Correct Answer: B) Cost-push Inflation. 18. What is the true measure of wealth? A) How much money you have. B) How many resources you have, like land. C) How much purchasing power you have. D) How much you are able to borrow. Show Answer Correct Answer: C) How much purchasing power you have. 19. In which year did the French army take over the German Ruhr coalfields? A) 1920. B) 1927. C) 1925. D) 1923. Show Answer Correct Answer: D) 1923. 20. In the long-run, the growth rate of money supply determines the growth rate of the ..... according to the quantity theory of money A) Real interest rate. B) Price level (inflation). C) Nominal interest rate. D) RGDP. Show Answer Correct Answer: B) Price level (inflation). 21. Which option would not cause demand-pull inflation? A) Higher interest rates to make borrowing more difficult. B) Higher level of consumer and producer confidence in the economy. C) Increase in government spending. D) Reduction in direct taxes. Show Answer Correct Answer: A) Higher interest rates to make borrowing more difficult. 22. More people working from home causes many people to buy desks and shelving, leading furniture stores to increase prices. A) Cost Push Inflation. B) Demand Pull Inflation. Show Answer Correct Answer: B) Demand Pull Inflation. 23. True or false? The consumer price index measures the price of a basket of food stuffs every year. A) False. B) True. Show Answer Correct Answer: A) False. 24. If the nominal interest rate is 6 per cent and the inflation rate is 3 per cent, the real interest rate is A) 18 percent. B) 3 percent. C) 6 percent. D) 9 percent. Show Answer Correct Answer: B) 3 percent. 25. Which year is the base year? 1997 CPI = 95 1998 CPI = 97 1999 CPI = 100 2000 CPI = 104 A) 2000. B) 1999. C) 1998. D) 1997. Show Answer Correct Answer: B) 1999. 26. What tool measures the change in slope of a volcano? A) Global Positioning System (GPS). B) Electronic Distance Meter (EDM). C) Tilt meter. D) None of above. Show Answer Correct Answer: C) Tilt meter. 27. Which of the following shows the difference between deflation and disinflation A) Disinflation is when the inflation rate is positive but increasing whereas deflation is when the inflation rate is negative. B) Disinflation is when the inflation rate is negative but decreasing whereas deflation is when the inflation rate is negative and increasing. C) Disinflation is when the inflation rate is negative but increasing whereas deflation is when the inflation rate is negative and decreasing. D) Disinflation is when the inflation rate is positive but decreasing whereas deflation is when the inflation rate is negative. Show Answer Correct Answer: D) Disinflation is when the inflation rate is positive but decreasing whereas deflation is when the inflation rate is negative. 28. The quantity theory of money suggests that an increase in the money supply increases real output proportionately. A) True. B) False. Show Answer Correct Answer: B) False. 29. Debtors are winner because A) Their assets tend to hold their value through inflationary periods. B) Their debts carry fixed rates. They pay their loans back in less valuable currency. Show Answer Correct Answer: B) Their debts carry fixed rates. They pay their loans back in less valuable currency. 30. What is the average price of goods and services in the economy called? A) Consumer price index. B) Price level. C) Inflation rate. D) Producer price index. Show Answer Correct Answer: B) Price level. ← 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