AnswersOC27 Economics-2102310-Sem-MeadowsUnit Test

4.4 Inflation and Stagflation Answers

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1
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Typically, low inflation is a sign of

A
a healthy economy because it results from a steady rise in demand.
B
a healthy economy because it results from a steady rise in supply.
C
a struggling economy because it results from a steady fall in demand.
D
a struggling economy because it results from a steady fall in supply.
2
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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

Question illustration
A
rising unemployment and inflation.
B
falling unemployment and inflation.
C
rising unemployment and falling inflation.
D
falling unemployment and rising inflation.
3

Consumers having more money to purchase computers will most likely result in

A
a decrease in prices for computers and computer accessories.
B
an increase in prices for computers and computer accessories.
C
a decrease in prices for computers, but not computer accessories.
D
an increase in prices for computers, but not computer accessories.
4

The equation calculates an annual rate in economics.What rate does the equation calculate?

Question illustration
A
employment rate
B
inflation rate
C
demand rate
D
supply rate
5

Why is gasoline weighted more heavily than tomatoes in a calculation of the annual inflation rate in the United States?

A
Gasoline costs more to produce and purchase than tomatoes.
B
Gasoline is imported from other nations at a higher rate than tomatoes.
C
Americans purchase many more boxes of tomatoes than barrels of gasoline.
D
Americans spend more money on gasoline than tomatoes, on average.
6

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?

A
Producers raise prices to continue to make a profit.
B
The government prints more money, lowering the value of money.
C
Workers negotiate with employers to receive more money.
D
Consumers need higher wages to keep up with rising prices.
7

Why is gasoline weighted more heavily than tomatoes in a calculation of the annual inflation rate in the United States?

A
Gasoline costs more to produce and purchase than tomatoes.
B
Gasoline is imported from other nations at a higher rate than tomatoes.
C
Americans purchase many more boxes of tomatoes than barrels of gasoline.
D
Americans spend more money on gasoline than tomatoes, on average.
8

Typically, high inflation is a sign of

A
a healthy economy because it results from a fall in production costs.
B
a healthy economy because it results from a rise in consumer interest.
C
a struggling economy because wages cannot keep up with the increase in prices.
D
a struggling economy because it results from a fall in consumer interest.
9

Which scenario is an example of cost-push inflation?

A
Consumers have more money to buy cars, and the prices of cars and car parts rise as a result.
B
An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.
C
The demand for cars falls as consumers have less disposable income, and car prices fall as a result.
D
A government bailout helps car manufacturers lower their costs, and car prices fall as a result.
10

[BLANK]

A
lose
B
gain
11

Stagflation occurs when high inflation combines with

A
high unemployment and a low level of production.
B
low unemployment and a high level of production.
C
a drop in buying power and a rise in workers’ wages.
D
a rise in buying power and a drop in workers’ wages.
12

When government intervention makes currency worthless, this condition is called

A
deflation.
B
hyperinflation.
C
cost-push inflation.
D
demand-pull inflation.
13

Hyperinflation can occur when

A
consumers begin purchasing more goods.
B
producers need more money to make and distribute goods.
C
companies raise prices to pass on costs to consumers.
D
the government prints a ton of money in order to pay off its debt.
14

Which scenario is an example of demand-pull inflation?

A
Consumers have more money to buy cars, and the prices of cars and car accessories rise as a result.
B
An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.
C
The demand for cars falls as consumers have less disposable income, and car prices fall as a result.
D
A government bailout helps car manufacturers lower their costs, and car prices fall as a result.
15

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

Question illustration
A
rising unemployment and inflation.
B
falling unemployment and inflation.
C
rising unemployment and falling inflation.
D
falling unemployment and rising inflation.
16

Hyperinflation can occur when

A
consumers begin purchasing more goods.
B
producers need more money to make and distribute goods.
C
companies raise prices to pass on costs to consumers.
D
the government prints a ton of money in order to pay off its debt.
17

Demand-pull inflation happens when the demand for goods

A
remains very low.
B
shifts up and down.
C
matches the supply.
D
increases.
18

Which is an effect of stagflation?

A
Trade with other economies increases.
B
The value of a country’s currency drops.
C
Prices for goods fall sharply and suddenly.
D
The GDP rises along with production levels.
19

Typically, low inflation is a sign of

A
a healthy economy because it results from a steady rise in demand.
B
a healthy economy because it results from a steady rise in supply.
C
a struggling economy because it results from a steady fall in demand.
D
a struggling economy because it results from a steady fall in supply.
20

How does demand-pull inflation differ from cost-push inflation?

A
Demand-pull inflation is driven by consumers, while cost-push inflation is driven by producers.
B
Demand-pull inflation is driven by producers, while cost-push inflation is driven by consumers.
C
Demand-pull inflation is driven by the private sector, while cost-push inflation is driven by the government.
D
Demand-pull inflation is driven by the government, while cost-push inflation is driven by the private sector.

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