Answers EAP-Economics and Personal Finance BInflation and Stagflation

Inflation and Stagflation Answers

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Typically, high inflation is a sign of

a healthy economy because it results from a fall in production costs.

a healthy economy because it results from a rise in consumer interest.

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

a struggling economy because it results from a fall in consumer interest.

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When government intervention makes currency worthless, this condition is called

deflation.

hyperinflation.

cost-push inflation.

demand-pull inflation.

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.

Production begins to fall.

Production begins to rise.

Interest rates decrease.

Interest rates increase.

Purchasing power falls.

Fewer fixed rate bank loans.

Demand-pull inflation happens when the demand for goods

remains very low.

shifts up and down.

matches the supply.

increases.

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?

Producers raise prices to continue to make a profit.

The government prints more money, lowering the value of money.

Workers negotiate with employers to receive more money.

Consumers need higher wages to keep up with rising prices.

Hyperinflation can occur when

consumers begin purchasing more goods.

producers need more money to make and distribute goods.

companies raise prices to pass on costs to consumers.

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

The graph shows changes in the US economy between 1971 and 2001.According to the graph, 1971 to 1976 was a period of stagflation due to

rising unemployment and inflation.

falling unemployment and inflation.

rising unemployment and falling inflation.

falling unemployment and rising inflation.

Which is the best definition of inflation?

a gradual decrease in the price of goods and services

a gradual increase in the price of goods and services

an exponential decrease in the price of goods and services

an exponential increase in the price of goods and services

Typically, low inflation is a sign of

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

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

a struggling economy because it results from a steady fall in demand.

a struggling economy because it results from a steady fall in supply.

Which scenario is an example of demand-pull inflation?

Consumers have more money to buy cars, and the prices of cars and car accessories rise as a result.

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

The demand for cars falls as consumers have less disposable income, and car prices fall as a result.

A government bailout helps car manufacturers lower their costs, and car prices fall as a result.

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Inflation and Stagflation Answers

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