18 Questions
What is the fundamental truth about the economy highlighted in the text?
The economy is very unpredictable.
Deflation occurs when:
The supply of goods matches the demand in an economy.
What is the impact of inflation on purchasing power?
It decreases the purchasing power over time.
Which factor influences personal financial planning according to the text?
Changing needs over the life cycle
What does inflation refer to?
An increase in prices over time.
How does inflation impact the Consumer Price Index (CPI)?
Inflation and CPI move in the same direction.
What is the consensus view among economists regarding sustained inflation?
It occurs when a nation's money supply growth outpaces economic growth.
Which of the following is considered a primary consumer need in the Consumer Price Index (CPI)?
Transportation, food, and medical care
In the provided scenario with John and his groceries, what was the inflation rate when the price increased from $200 to $210?
5%
How does inflation impact the purchasing power of the common public?
It decreases purchasing power.
What does CPI stand for in the context of measuring inflation?
Consumer Price Index
What factor leads to sustained inflation?
Increase in money supply growth compared to economic growth
What is the formula for calculating inflation rate as shown in the text?
Dividing the difference between the current and previous price levels by the previous price level
Based on the text, when central banks set interest rates at a high level, what is the expected impact on borrowing?
Borrowing costs rise
How does inflation affect consumer purchasing power?
Reduces consumer purchasing power
In the context of economic cycles, what characterizes a period of recession?
Decreasing employment levels
What is the purpose of the Consumer Price Index (CPI) mentioned in the text?
To track changes in consumer prices over time
According to the relationship mentioned in the text, what tends to happen to interest rates as inflation rises?
Interest rates tend to rise
Test your knowledge on calculating inflation rates using examples. Practice formulas to determine the percentage change in prices over a period of time.
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