4 Questions
What are the causes of inflation?
Causes of inflation include an increase in the money supply, demand-pull inflation, cost-push inflation, and built-in inflation.
What are the effects of inflation on an economy?
Inflation can lead to a reduction in the purchasing power of money, uncertainty in financial planning, redistribution of income and wealth, and a potential decrease in international competitiveness.
What is the role of central banks in controlling inflation?
Central banks use monetary policy tools such as interest rates and open market operations to control inflation. They aim to keep inflation within a target range to maintain price stability.
How does inflation impact savings and investments?
Inflation erodes the real value of savings and investments because the purchasing power of money decreases as prices rise. This can affect long-term financial planning and retirement savings.
Test your knowledge of inflation with this quiz! Explore the definition of inflation, its causes, and its impact on the economy. Challenge yourself with questions about the functions of inflation and its effects on various economic factors.
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