Understanding Inflation and Its Effects
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Questions and Answers

What is the definition of inflation?

  • A situation of rising prices in the economy
  • A sustained decrease in the general price level in an economy
  • A sustained increase in the general price level in an economy (correct)
  • A situation of falling prices in the economy

    • What is the effect of inflation on money?

  • It increases the purchasing power of money
  • It decreases the purchasing power of money (correct)
  • It does not affect the purchasing power of money
  • It increases the value of money

    • When did the biggest decline in the purchasing power of the dollar occur?

  • In the 1960s
  • In the 1970s (correct)
  • In the 1980s
  • In the 1990s

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