This quiz works best with JavaScript enabled. Home > Finance > Economics > Macroeconomics > Inflation And Deflation > Inflation And Deflation – Quiz 8 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation And Deflation Quiz 8 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Prices driven higher due to an increase in higher unit wages, import prices, indirect taxes etc A) Demand Pull. B) Cost push. Show Answer Correct Answer: B) Cost push. 2. To close an inflationary gap, the government could A) Run budget deficits. B) Run budget surpluses. C) Decrease income taxes. D) Increase development expenditure. Show Answer Correct Answer: B) Run budget surpluses. 3. Hyperinflation can occur when: A) The government increases regulation on an industry. B) The government prints excessive money to fund itself. C) The government raises taxes to fund itself. D) None of them are correct. E) Only a & b. Show Answer Correct Answer: B) The government prints excessive money to fund itself. 4. Cost-Push theory is when producers raise prices to meet the increased costs A) False. B) True. Show Answer Correct Answer: B) True. 5. Why are food and energy taken out of core inflation measures? A) Central banks do not look at commodity or retail prices when monitoring inflation. B) Food and energy prices fluctuate from month to month, so inflation is hard to gauge through these prices. C) They are bought by everybody, so they are not important. D) Their prices usually remain stable, with few changes over time. Show Answer Correct Answer: B) Food and energy prices fluctuate from month to month, so inflation is hard to gauge through these prices. 6. What is the consumer price index? A) A measure of prices of housing and rental cost all over the country. B) An index of the cost of living for all U.S. Consumers. C) An index determined by measuring the price of standard goods bought by consumers. D) None of above. Show Answer Correct Answer: C) An index determined by measuring the price of standard goods bought by consumers. 7. What are the negative effects of high inflation on an economy? A) Stimulating economic growth, increasing employment opportunities, and boosting consumer spending. B) Eroding purchasing power, reducing consumer and investor confidence, distorting price signals, increasing uncertainty, and creating income inequality. C) Encouraging investment, promoting innovation, and fostering economic development. D) Stabilizing prices, reducing income inequality, and improving financial stability. Show Answer Correct Answer: B) Eroding purchasing power, reducing consumer and investor confidence, distorting price signals, increasing uncertainty, and creating income inequality. 8. Which of the following best describes the term Foreign Direct Investment (FDI)? A) When a country makes an investment into a company. B) When a domestic country invests into its own companies. C) When a company makes an investment into a foreign country and has right to control. D) When foreign individuals invest in domestic stock markets. Show Answer Correct Answer: C) When a company makes an investment into a foreign country and has right to control. 9. What is Jin's real rate of return? Jin makes 8% on Amazon stock and inflation was 1%. A) 1%. B) 9%. C) 8%. D) 7%. Show Answer Correct Answer: D) 7%. 10. 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. 11. Deflation results from ..... the money supply at too rapid a rate for a sustained period of time A) Decreasing. B) Increasing. Show Answer Correct Answer: A) Decreasing. 12. 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. 13. Why was the Ruhr district of Germany so important? A) It was a massive coal producing district. B) It was a massive iron producing district. C) It was a massive water producing district. D) It was a massive mineral producing district. Show Answer Correct Answer: A) It was a massive coal producing district. 14. 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%. 15. Unexpected inflation will benefit banks and other lenders A) False. B) True. Show Answer Correct Answer: A) False. 16. 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 government budget deficit. B) Reducing the level of unemployment. C) Reducing a balance of trade in goods surplus. D) Reducing the rate of inflation. Show Answer Correct Answer: D) Reducing the rate of inflation. 17. 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) 4%. B) -4%. C) 10%. D) 9%. Show Answer Correct Answer: B) -4%. 18. 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 improve the purchasing power of the domestic currency. C) Interest rates are raised to attract cheaper foreign imports in the face of lower domestic production. D) Interest rates are raised to discourage domestic credit consumption. Show Answer Correct Answer: A) Interest rates are raised to attract domestic deposit in the face of a rapidly growing economy. 19. 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. 20. Exchange rate depreciation puts ..... A) Upward pressure on inflation. B) Downward pressure on inflation. Show Answer Correct Answer: A) Upward pressure on inflation. 21. Which of the following is a possible cause of demand-pull inflation? A) A rise in imports. B) A rise in wages. C) An increase in the price of oil. D) An increase in government expenditure. Show Answer Correct Answer: D) An increase in government expenditure. 22. 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. 23. 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) Spending on imported goods is reduced. B) Countries have to barter manufactured goods for raw materials. C) Goods manufactured for export lose their competitiveness. D) Numbers of foreign visitors increase. Show Answer Correct Answer: C) Goods manufactured for export lose their competitiveness. 24. 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. 25. 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. 26. 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; R4 800. B) Beneficial; R8 000. C) Beneficial; R9 600. D) Costly; R10500. Show Answer Correct Answer: C) Beneficial; R9 600. 27. 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) 46.90%. B) 4.7%. C) 7.8%. D) 12.14%. Show Answer Correct Answer: B) 4.7%. 28. 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%. 29. A small level of inflation is good for the economy. A) True. B) False. Show Answer Correct Answer: A) True. 30. ..... are common products that consumers buy in a month.(used for CPI) A) Monetary policy. B) Market basket. C) Fiscal policies. D) Inflation. Show Answer Correct Answer: B) Market basket. ← 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 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books