This quiz works best with JavaScript enabled. Home > Macroeconomics > Inflation > Inflation – Quiz 6 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Inflation Quiz 6 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which of the following describe as 'a very rapid and large rise in the price level'? A) Cost-push inflation. B) Demand-pull inflation. C) Monetary inflation. D) Hyperinflation. Show Answer Correct Answer: D) Hyperinflation. 2. The ..... considers the weighted averages of a group of consumer goods and services. Think of it as a shopping cart where the measure the increase in prices for all the items. A) Consumer price index. B) Aggregate supply. C) Producer price index. D) Aggregate demand. Show Answer Correct Answer: A) Consumer price index. 3. Each month your rent increases so you can't set up an online automatic payment. You must pay cash and deliver the rent to your landlord in person. A) Shoe leather cost. B) Menu cost. C) Unit of account cost. D) None of above. Show Answer Correct Answer: A) Shoe leather cost. 4. If the money supply grows 5 per cent, and real output grows 2 per cent, prices should rise by A) 5 per cent. B) More than 5 per cent. C) Less than 5 per cent. D) None of these answers. Show Answer Correct Answer: C) Less than 5 per cent. 5. What must be true if an economy is experiencing inflation? A) A Aggregate demand is increasing. B) B Aggregate supply is decreasing. C) C The interest rate is increasing. D) D The real value of money is decreasing. Show Answer Correct Answer: D) D The real value of money is decreasing. 6. If the rate of inflation rises above their target level what does the Central Bank do? A) Puts more money into circulation. B) Increases interest rates and/or increases the reserve ratio. C) Decreases interest rates and/or decreases the reserve ratio. D) None of above. Show Answer Correct Answer: B) Increases interest rates and/or increases the reserve ratio. 7. Using a range of goods and services that reflects a typical household A) Base year. B) Price index. C) Weighting. D) Representative basket. Show Answer Correct Answer: D) Representative basket. 8. A healthy inflation rate is between ..... A) 10-20%. B) Less than 5%. C) Greater than 5%. D) 1-3%. Show Answer Correct Answer: D) 1-3%. 9. Inflation occurs whenever: A) Aggregate demand rises. B) The average price of most goods and services rises. C) The price of any given commodity rises. D) The tax rate is lower than the government spending rate. Show Answer Correct Answer: B) The average price of most goods and services rises. 10. The ..... measures the cost of the market basket of a typical urban American family. A) Consumer Price Index (CPI). B) Producer Price Index (PPI). C) Aggregate Price Level. D) Inflation Rate. Show Answer Correct Answer: A) Consumer Price Index (CPI). 11. The following is the causes of inflation EXCEPT A) Demandfull inflation. B) Built-in inflation. C) Exchange rates. D) The consumer price index. Show Answer Correct Answer: D) The consumer price index. 12. When Inflation occurs, A) Price decreases in the economy. B) The purchasing power of money decreases in the economy. C) The dollar appreciates on foreign exchange markets. D) Basic necessities become cheaper. Show Answer Correct Answer: B) The purchasing power of money decreases in the economy. 13. 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. 14. A worker earns $ 250 each week, which leaves a disposable income of $ 175. What will affect the real value of the worker's $ 250 earned income? A) A change in government spending. B) A change in interest rates. C) A change in the price level. D) A change in the tax rate. Show Answer Correct Answer: C) A change in the price level. 15. What is the primary cause of deflation according to monetarist theory? A) A rapidly changing velocity of money. B) The money supply increase too rapidly for a long time. C) The money supply decreases faster than real output decreases. D) Any decrease in the money supply. Show Answer Correct Answer: C) The money supply decreases faster than real output decreases. 16. The impacts of cost push inflation are A) Higher prices and increased economic growth. B) Higher prices and decreased structural unemployment. C) Higher prices and increased cyclical unemployment. D) Higher price s and full employment. Show Answer Correct Answer: C) Higher prices and increased cyclical unemployment. 17. The producer price index (PPI): A) Measures the cost of a representative basket of goods and services to the consumers. B) Includes the cost of manufactured goods to the consumers. C) Includes the cost of capital and intermediate goods. D) Excludes the price of imported goods. Show Answer Correct Answer: C) Includes the cost of capital and intermediate goods. 18. A general reduction in overall prices. A) Inflation. B) Deflation. C) Consumer Prices. D) Federal Reserve. Show Answer Correct Answer: B) Deflation. 19. Which of the following variables is not included into the quantity equation: A) Number of consumers. B) Velocity. C) Price. D) Transactions. Show Answer Correct Answer: A) Number of consumers. 20. Who, among the following, is most likely to benefit during a period of rapid inflation? A) Borrowers. B) Pensioners. C) Savers. D) Workers in strong unions. Show Answer Correct Answer: A) Borrowers. ← PreviousNext →Related QuizzesMacroeconomics QuizzesInflation Quiz 1Inflation Quiz 2Inflation Quiz 3Inflation Quiz 4Inflation Quiz 5Inflation Quiz 7Inflation Quiz 8Inflation Quiz 9Inflation Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books