#1
Which of the following is a measure of the average level of prices of goods and services in an economy over a period of time?
Consumer Price Index (CPI)
ExplanationCPI measures average price levels over time.
#2
Which of the following is NOT a measure of inflation?
Gross Domestic Product (GDP)
ExplanationGDP measures economic output, not inflation.
#3
Which of the following is a limitation of using the Consumer Price Index (CPI) as a measure of inflation?
It does not account for changes in the quality of goods and services.
ExplanationCPI ignores changes in quality.
#4
What is the difference between inflation and deflation?
Inflation refers to an increase in the general price level of goods and services, while deflation refers to a decrease.
ExplanationInflation: Prices up, deflation: Prices down.
#5
Which of the following is a consequence of hyperinflation?
Weakened confidence in the currency
ExplanationHyperinflation erodes currency confidence.
#6
Which of the following statements about the Consumer Price Index (CPI) is true?
It measures the change in the cost of a basket of goods and services over time.
ExplanationCPI tracks changes in a basket of goods and services.
#7
Which of the following factors can cause inflation?
Increased government spending
ExplanationGovernment spending can lead to inflation.
#8
What does the Producer Price Index (PPI) measure?
The change in prices of goods and services produced by firms.
ExplanationPPI tracks prices at producer level.
#9
What is the difference between demand-pull inflation and cost-push inflation?
Demand-pull inflation is caused by an increase in aggregate demand, while cost-push inflation is caused by an increase in production costs.
ExplanationDifferent causes drive these two types of inflation.
#10
What is the difference between the GDP deflator and the Consumer Price Index (CPI)?
The GDP deflator measures the change in prices of all goods and services produced domestically, while the CPI measures the change in prices of goods and services purchased by consumers.
ExplanationGDP deflator vs CPI: Production vs Consumer.
#11
What is the substitution bias in the Consumer Price Index (CPI)?
It occurs when consumers substitute goods and services in response to price changes, but this substitution is not reflected in the CPI.
ExplanationCPI may miss changes due to consumer substitutions.
#12
What is the difference between nominal and real values?
Real values are adjusted for inflation, while nominal values are not.
ExplanationReal values account for inflation.
#13
What does the GDP deflator measure?
The ratio of nominal GDP to real GDP multiplied by 100.
ExplanationGDP deflator adjusts GDP for inflation.
#14
What is the Laspeyres price index?
A price index that uses base-year quantities as weights.
ExplanationLaspeyres index weights by base-year quantities.
#15
What is the Fisher price index?
A price index that considers changes in both the quantity and quality of goods.
ExplanationFisher index adjusts for both quantity and quality changes.
#16
Which of the following is true regarding hyperinflation?
It is caused by excessive growth in the money supply.
ExplanationHyperinflation results from rapid money supply growth.
#17
What is the core inflation rate?
It excludes volatile food and energy prices from the calculation of inflation.
ExplanationCore inflation omits volatile food and energy prices.