Inflation - Question Bank

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Question Bank - Economics

Inflation

Q1. Other things constant, if the anticipated rate of inflation rises, we would expect the nominal interest rate to (Select one answer) (a) remain unchanged (b) rise by the same amount as the increase in the anticipated rate of inflation (c) fall by the same amount as the increase in the anticipated rate of inflation (d) rise, but by less than the anticipated increase in the rate of inflation

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Q2. Real GDP is gross domestic product measured (Select one answer) (a) in the prices of a base year. (b) in current dollars. (c) at a constant output level but at current prices. (d) as the difference between the current year's GDP and last year's GDP

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Q4. Suppose that currently the average inflation rate is 5% per year; however, business firms and labour anticipate that the general price level will increase by substantially more than the 5% over the next two years. Other things constant, these expectations can cause (Select one answer) (a) an acceleration of the rate of increase in the price level (b) an increase in the productivity of business firms and labour (c) a decrease in the rate of inflation (d) no actual change in the price level but an increase in the level of unemployment

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