#1
What does CPI stand for in economics?
Consumer Price Index
ExplanationA measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
#2
Which of the following is NOT a cause of inflation?
Decrease in the money supply
ExplanationA decrease in the money supply would lead to deflation, not inflation.
#3
Inflation is measured using which of the following?
Consumer Price Index (CPI)
ExplanationCPI tracks changes in the price level of a market basket of consumer goods and services purchased by households.
#4
What is 'core inflation'?
Inflation rate calculated without energy and food prices
ExplanationIt aims to measure the underlying inflationary trend by excluding volatile food and energy prices.
#5
What is the main effect of high inflation on borrowers?
Borrowers suffer because the real value of the money they repay increases.
ExplanationHigh inflation erodes the purchasing power of money, making borrowed funds more expensive to repay.
#6
Which of the following is NOT a type of inflation?
Deflation
ExplanationDeflation is the decrease in the general price level of goods and services.
#7
What is the relationship between inflation and unemployment known as?
Phillips Curve
ExplanationThe Phillips Curve suggests an inverse relationship between unemployment and inflation.
#8
Which of the following best describes demand-pull inflation?
Inflation caused by excessive demand relative to supply.
ExplanationDemand-pull inflation occurs when aggregate demand exceeds aggregate supply, leading to upward pressure on prices.
#9
Hyperinflation is characterized by:
Extremely high and rapidly accelerating inflation
ExplanationHyperinflation occurs when prices increase rapidly as a currency loses its value.
#10
Which of the following is a drawback of using the CPI to measure inflation?
It may overstate inflation due to substitution bias.
ExplanationCPI may overstate inflation because it does not fully account for consumers' ability to substitute cheaper goods.
#11
What is the Fisher effect?
An increase in the nominal interest rate due to inflation expectations.
ExplanationInvestors demand higher nominal interest rates to compensate for expected inflation, according to the Fisher effect.