Inflation and Stagflation

Question 1

Which is the best definition of inflation?

Revolt · Accepted Answer

a gradual increase in the price of goods and services

Question 2

Typically, low inflation is a sign of

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a healthy economy because it results from a steady rise in demand.

Question 3

Why is gasoline weighted more heavily than tomatoes in a calculation of the annual inflation rate in the United States?

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Americans spend more money on gasoline than tomatoes, on average.

Question 4

Consumers having more money to purchase computers will most likely result in

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an increase in prices for computers and computer accessories.

Question 5

When government intervention makes currency worthless, this condition is called

Revolt · Accepted Answer

hyperinflation.

Question 6

Hyperinflation can occur when

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the government prints a ton of money in order to pay off its debt.

Question 7

Which scenario is an example of cost-push inflation?

Revolt · Accepted Answer

An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.

Question 8

Demand-pull inflation happens when the demand for goods

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increases.

Question 9

What are the signs of high inflation? Check all that apply.Production begins to fall.Production begins to rise.Interest rates decrease.Interest rates increase.Purchasing power falls.Fewer fixed rate bank loans.

Revolt · Accepted Answer

Production begins to fall.; Interest rates increase.; Purchasing power falls.; Fewer fixed rate bank loans.

Question 10

Typically, high inflation is a sign of

Revolt · Accepted Answer

a struggling economy because wages cannot keep up with the increase in prices.

Inflation and Stagflation Answers

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