Inflation Effects Quiz

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8 Questions

When demand-pull inflation occurs, what happens to purchasing power?

It increases

When inflation is high, if the increase in price is greater than the increase in nominal income, ______ power decreases.


Consumers who live off their ______ are especially affected by a decrease in the value of savings due to inflation.


Who is most affected by the decrease in the value of savings due to inflation?

Those who live off their savings, such as retirees

When inflation occurs, lower-income consumers are more adversely affected as a higher proportion of their income is spent on ______ goods.


When inflation occurs, the real income of ______-income earners remains stable, while that of fixed-income earners decreases.


When inflation occurs, if nominal i/r remains unchanged, savers/lenders are adversely affected as money received (interest or repayments) has lower purchasing ______ vs. money deposited or lent; converse applies to borrowers.


How are fixed-income earners affected when inflation occurs?

Their real income decreases

Study Notes

Test your knowledge of the effects of inflation on purchasing power, savings value, and different consumer groups. Learn how demand-pull inflation impacts fixed-income earners and lower-income consumers.

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