Inflation MCQ 2

Questions and Answers

Cost-pull inflation (correct)

Cost-push inflation

Supply-pull inflation

Demand-pull inflation

Import prices remain the same

Import prices increase (correct)

Export prices decrease

Import prices decrease

Stagflation

A decrease in the value of money (correct)

An increase in the value of money

No change in the value of money

Employment increases, income increases Signup and view all the answers

Demand-pull inflation Signup and view all the answers

A slowdown in the flow of money around the economy Signup and view all the answers

To compensate for the reduced revenue due to falling prices Signup and view all the answers

A slower economic growth Signup and view all the answers

It falls as consumers defer spending, waiting for prices to fall further Signup and view all the answers

A fall in the number of employed individuals Signup and view all the answers

Study Notes

During periods of economic growth, rising incomes lead to increased demand for goods and services, causing demand-pull inflation.
Increase in indirect taxes, such as the Carbon Tax on fuel, results in price rises for goods and services upon which these taxes are levied.

Currency depreciation, such as a decrease in the value of the euro, increases the cost of US imports for EU consumers.

Excessive money printing leads to a fall in the value of money, contributing to inflation.

Consumer spending decreases as consumers delay purchases, expecting prices to fall further, slowing down money circulation in the economy.
Investment decreases during uncertain periods, following the Law of Supply.
Employment falls as firms:
- Make less money due to reduced prices.
- Lower costs, including:
  - Lowering wages.
  - Cutting the number of employees.