18 Questions
If the nominal GDP growth rate is 5% and the inflation rate is 3%, what is the real GDP growth rate?
2%
Which of the following is true about the Consumer Price Index (CPI) and the Retail Price Index (RPI)?
RPI includes council tax and other housing costs, while CPI does not.
If the nominal wage growth rate is 4% and the inflation rate is 2%, what is the real wage growth rate?
2%
Which of the following is a potential cause of demand-pull inflation?
An increase in government spending or a decrease in taxes, leading to higher consumer spending.
If the inflation rate is 3% and the nominal interest rate on a savings account is 5%, what is the real interest rate?
2%
Which of the following is a potential effect of inflation on the economy?
A decrease in the real value of debt and savings.
What effect could an increase in oil prices have on raw materials?
Increase the costs of production
How could expectations of inflation influence wages?
Lead to workers demanding higher wages
What impact does an increase in indirect taxes have on the cost of goods?
Increase the cost of goods
How does a depreciation in the exchange rate affect the price of raw materials?
Increase the price of raw materials
What impact can high inflation have on firms' global price competitiveness?
Make firms less price competitive on a global scale
How does low interest rates affect borrowing and investing for firms?
Make borrowing and investing more attractive than saving profits
Which of the following is true about the Consumer Prices Index (CPI) in the UK?
It measures the cost of a fixed basket of goods and services purchased by households.
If the CPI rose from 100 to 105 over a year, what would be the approximate rate of inflation?
5%
Which of the following is a potential cause of demand-pull inflation?
A rise in household incomes and consumer spending
If the nominal value of a good increases by 5% and the rate of inflation is 3%, what is the approximate change in the real value of the good?
An increase of 2%
Which of the following is a potential effect of sustained high inflation?
A reduction in the incentive for firms to invest in new capital and technology
The Retail Prices Index (RPI) differs from the Consumer Prices Index (CPI) in that it includes:
The cost of housing services such as mortgage interest payments and council tax
Test your knowledge on factors that can impact the cost of production, such as rising oil prices, increasing labor costs, expectations of inflation, and indirect taxes. Understand how these factors can influence the prices of goods and services in the market.
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