Inflation and Stagflation Answers
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Typically, high inflation is a sign of
A
a healthy economy because it results from a fall in production costs.B
a healthy economy because it results from a rise in consumer interest.C
a struggling economy because wages cannot keep up with the increase in prices.D
a struggling economy because it results from a fall in consumer interest.2
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Why is gasoline weighted more heavily than tomatoes in a calculation of the annual inflation rate in the United States?
A
Gasoline costs more to produce and purchase than tomatoes.B
Gasoline is imported from other nations at a higher rate than tomatoes.C
Americans purchase many more boxes of tomatoes than barrels of gasoline.D
Americans spend more money on gasoline than tomatoes, on average.3
The equation calculates an annual rate in economics.What rate does the equation calculate?
A
employment rateB
inflation rateC
demand rateD
supply rate4
What is one consequence of stagflation?
A
The economy drastically slows down as money loses its buying power.B
Producers cannot keep up with consumer interest and raise their prices.C
There are not enough workers to meet the rising level of production.D
Demand is too high and people spend more money than they should.5
Which scenario is an example of demand-pull inflation?
A
Consumers have more money to buy cars, and the prices of cars and car accessories rise as a result.B
An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.C
The demand for cars falls as consumers have less disposable income, and car prices fall as a result.D
A government bailout helps car manufacturers lower their costs, and car prices fall as a result.6
Stagflation occurs when high inflation combines with
A
high unemployment and a low level of production.B
low unemployment and a high level of production.C
a drop in buying power and a rise in workers’ wages.D
a rise in buying power and a drop in workers’ wages.7
The inflationary spiral explains the causes and effects of high inflation. The spiral usually begins with an increase in demand. What is the direct effect of this increase?
A
Producers raise prices to continue to make a profit.B
The government prints more money, lowering the value of money.C
Workers negotiate with employers to receive more money.D
Consumers need higher wages to keep up with rising prices.8
Which scenario is an example of cost-push inflation?
A
Consumers have more money to buy cars, and the prices of cars and car parts rise as a result.B
An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.C
The demand for cars falls as consumers have less disposable income, and car prices fall as a result.D
A government bailout helps car manufacturers lower their costs, and car prices fall as a result.9
Typically, low inflation is a sign of
A
a healthy economy because it results from a steady rise in demand.B
a healthy economy because it results from a steady rise in supply.C
a struggling economy because it results from a steady fall in demand.D
a struggling economy because it results from a steady fall in supply.10
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