This quiz works best with JavaScript enabled. Home > Finance > Economics > Macroeconomics > Inflation And Deflation > Inflation And Deflation – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation And Deflation Quiz 5 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. How does inflation affect savings? A) Inflation has no impact on savings. B) Inflation increases the real value of money saved. C) Inflation only affects spending, not savings. D) Inflation reduces the real value of money saved. Show Answer Correct Answer: D) Inflation reduces the real value of money saved. 2. The condition of a continually rising price level is defined as A) Inflation. B) Stagflation. C) Disinflation. D) Stagnation. Show Answer Correct Answer: A) Inflation. 3. The prices by which rising wages cause higher prices, and higher prices cause higher wages A) Wage-price spiral. B) Hyperinflation. C) Consumer Price Index. D) Quantity theory. E) Inflation rate. Show Answer Correct Answer: A) Wage-price spiral. 4. What is the effect of inflation on purchasing power? A) It increases purchasing power. B) It depends on the rate of inflation. C) It decreases purchasing power. D) It has no effect on purchasing power. Show Answer Correct Answer: C) It decreases purchasing power. 5. Governments may pursue inflationary monetary policies A) To promote high employment. B) To accommodate demands of workers for higher wages. C) To finance a persistent budget deficit. D) For all the above reasons. Show Answer Correct Answer: D) For all the above reasons. 6. Most comprehensive measurement of inflation because it doesn't focus on a fixed basket of goods. A) GDP Deflator. B) Consumer Price Index. C) Personal Consumption Expenditures Index. D) None of above. Show Answer Correct Answer: A) GDP Deflator. 7. When prices rise at an extraordinarily fast rate, it is called A) Deflation. B) Hyperinflation. C) Disinflation. D) Hypoinflation. E) Inflation. Show Answer Correct Answer: B) Hyperinflation. 8. What happened to the economy of Weimar Germany as a result of the French occupation of the Ruhr? A) It led to a deflation. B) Nothing. C) It led to hyper-inflation. D) It led to inflation. Show Answer Correct Answer: C) It led to hyper-inflation. 9. Inflation is ..... A) A measure of price change. B) An increase in general price levels. C) A decrease in general price level. D) An increase in the rate of price increase. Show Answer Correct Answer: B) An increase in general price levels. 10. What is the difference between headline inflation and core inflation? A) Headline inflation includes only goods, while core inflation includes only services. B) Headline inflation includes volatile items like food and energy, while core inflation includes non-volatile items. C) Headline inflation measures the change in prices over time, while core inflation measures the change in quantity of goods and services. D) Headline inflation includes all goods and services, while core inflation excludes volatile items like food and energy. Show Answer Correct Answer: D) Headline inflation includes all goods and services, while core inflation excludes volatile items like food and energy. 11. Which of the following is an explanation of a deflationary spiral? A) A decrease in prices causes a large increase in consumption, which leads to further increases in aggregate demand. B) An increase in prices causes consumers to decrease consumption, which reduces aggregate demand and causes deflation. C) An increase in prices causes the government to print more and more money until the rate of inflation increases to more than 50%. D) A decrease in prices causes consumers to delay purchases, which reduces aggregate demand and causes more deflation. Show Answer Correct Answer: D) A decrease in prices causes consumers to delay purchases, which reduces aggregate demand and causes more deflation. 12. Which one of the following is not an effect of increased inflation? A) Lower standard of living. B) Loss of international competitiveness. C) Saving is encouraged. D) Saving is discouraged. Show Answer Correct Answer: C) Saving is encouraged. 13. However, long run, persistent deflation is caused by (a) the money supply. A) A decreasing. B) Increasing. Show Answer Correct Answer: A) A decreasing. 14. The velocity of money is A) Highly unstable. B) Impossible to measure. C) The rate at which money loses its value.hanges hands. D) The rate at which inflation rises. E) The rate at which money c. Show Answer Correct Answer: E) The rate at which money c. 15. The group of goods and services selected and used to measure inflation is referred to as a/an A) Big Basket. B) Market Basket. C) Economic Basket. D) None of above. Show Answer Correct Answer: B) Market Basket. 16. Which of the following is not part of calculating CPI A) Survey households on their day-to-day spending. B) Assigning weights to different goods. C) Transferring to index form. D) Measuring changes to mortgage and other housing costs. Show Answer Correct Answer: D) Measuring changes to mortgage and other housing costs. 17. At first cut, the simple solution to fighting inflation is A) To impose price controls on businesses that attempt to raise prices. B) Reducing the growth rate of the money supply. C) Limiting the number of terms that politicians can serve in elective office. D) Returning the economy to barter by prohibiting the use of fiat money. Show Answer Correct Answer: B) Reducing the growth rate of the money supply. 18. When is the inflation rate most likely to increase? A) During economic growth. B) During economic contraction. Show Answer Correct Answer: A) During economic growth. 19. When the inflation rate rises ..... A) The general price level increases. B) The general price level decreases. Show Answer Correct Answer: A) The general price level increases. 20. ..... is when the buying power of money goes down and prices go up. A) Market Basket. B) Inflation. C) Fixed Income. D) Deflation. Show Answer Correct Answer: B) Inflation. 21. Which is NOT a limitation of CPI? A) Used to measure the rate of inflation. B) Spending patterns of different households. C) Changing quality of goods and services. D) New products and time lag. Show Answer Correct Answer: A) Used to measure the rate of inflation. 22. Weighting is used in the CPI to represent different family sizes A) True. B) False. Show Answer Correct Answer: B) False. 23. Savers are loser of inflation because A) Fixed pension or interest income from investments your income will not grow with inflation. B) The inflation rate is lower than the interest rate, savings are decreasing in value. C) The inflation rate is higher than the interest rate, savings are decreasing in value. D) None of above. Show Answer Correct Answer: C) The inflation rate is higher than the interest rate, savings are decreasing in value. 24. The main reason why the price of goods and services increase overtime is because of A) Government controls. B) Inflation. C) Deflation. D) None of above. Show Answer Correct Answer: B) Inflation. 25. However, long run, persistent inflation is caused by (a) the money supply. A) Decreasing. B) A increasing. Show Answer Correct Answer: B) A increasing. 26. There are two tools of Fiscal Policy, which are A) Cash rate and Reserve Requirements. B) Open Market Operations and Tax. C) Government spending and Reserve Requirements. D) Tax and Government Spending. Show Answer Correct Answer: D) Tax and Government Spending. 27. ..... When a government prints lots of money, people have more money to bid up prices which causes inflation. Economists refer to this as "too much money chasing too few goods." A) False. B) True. Show Answer Correct Answer: B) True. 28. Over the long term, low level inflation is barely noticeable. A) False. B) True. Show Answer Correct Answer: A) False. 29. Money supply creates inflation only when ..... A) The money is printed slower than the economy grows. B) The money is printed faster than the economy grows. C) The money is printed at the same speed than the economy grows. D) None of above. Show Answer Correct Answer: B) The money is printed faster than the economy grows. 30. What may affect the impact of inflation in the economy? A) The cost of borrowing. B) The ONS. C) Boris Johnson's suit. D) The bargaining power of workers-trade unions. Show Answer Correct Answer: D) The bargaining power of workers-trade unions. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesInflation And Deflation Quiz 1Inflation And Deflation Quiz 2Inflation And Deflation Quiz 3Inflation And Deflation Quiz 4Inflation And Deflation Quiz 6Inflation And Deflation Quiz 7Inflation And Deflation Quiz 8Inflation And Deflation Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books