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16 Questions

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Inflation Basics

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Questions and Answers

What does inflation refer to?

General increase in the price level of goods and services (correct)

Decrease in the price level of goods and services

Fluctuation of the price level of goods and services

Stagnation of the price level of goods and services

What can contribute to inflation?

Decline in money circulation

Balance between supply and demand for money (correct)

Decrease in consumer spending

Reduced production costs

How is inflation typically expressed?

Absolute value

Percentage representing the annual rate at which prices are rising (correct)

Ratio of demand to supply

Average price index

How can government spending contribute to demand-pull inflation?

By increasing spending on infrastructure projects or public services Signup and view all the answers

What is one factor that can lead to demand-pull inflation?

Increased consumer spending Signup and view all the answers

What effect can higher levels of business investment have on inflation?

Create a demand-pull effect on prices Signup and view all the answers

What is the main effect of loose monetary policies on borrowing and spending?

Increased borrowing and spending Signup and view all the answers

What is the primary cause of cost-push inflation?

Rising input costs Signup and view all the answers

Which index measures the average change in prices paid by consumers for goods and services over time?

Consumer Price Index (CPI) Signup and view all the answers

What is another name for built-in inflation?

Wage-price inflation Signup and view all the answers

Which factor can directly impact production costs?

Increased costs of raw materials Signup and view all the answers

What can disrupt the supply chain, causing shortages and increased costs?

Natural disasters Signup and view all the answers

What is the measure that evaluates the average change over time in the selling prices received by domestic producers for their output?

Producer Price Index (PPI) Signup and view all the answers

What is the main factor leading to built-in inflation?

Rising wages Signup and view all the answers

What is the primary cause of moderate inflation in an economy?

A sustained increase in the general price level of goods and services over time. Signup and view all the answers

What leads to a continuous and self-sustaining increase in prices in an economy?