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Inflation - Question Bank

Question Bank ''Inflation'' with interactive revision questions on a variety of economics topics.

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

Source: McGraw Hill logo

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

Source: Pearson logo

Q3. The index used most often to measure inflation is the

(Select one answer)

(a) * producer price index.
(b) * GDP deflator.
(c) * wholesale price index.
(d) * consumer price index.

Source: Pearson logo

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

Source: McGraw Hill logo

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