Answers FL-2102340-Economics with Financial Literacy Teacher DirectedInflation and Stagflation

Inflation and Stagflation Answers

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What are the signs of high inflation? Check all that apply.Production begins to fall.Production begins to rise.Interest rates decrease.Interest rates increase.Purchasing power falls.Fewer fixed rate bank loans.

Production begins to fall.

Production begins to rise.

Interest rates decrease.

Interest rates increase.

Purchasing power falls.

Fewer fixed rate bank loans.

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Which is an effect of stagflation?

Trade with other economies increases.

The value of a country’s currency drops.

Prices for goods fall sharply and suddenly.

The GDP rises along with production levels.

Typically, high inflation is a sign of

a healthy economy because it results from a fall in production costs.

a healthy economy because it results from a rise in consumer interest.

a struggling economy because wages cannot keep up with the increase in prices.

a struggling economy because it results from a fall in consumer interest.

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

Demand-pull inflation is driven by consumers, while cost-push inflation is driven by producers.

Demand-pull inflation is driven by producers, while cost-push inflation is driven by consumers.

Demand-pull inflation is driven by the private sector, while cost-push inflation is driven by the government.

Demand-pull inflation is driven by the government, while cost-push inflation is driven by the private sector.

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

Gasoline costs more to produce and purchase than tomatoes.

Gasoline is imported from other nations at a higher rate than tomatoes.

Americans purchase many more boxes of tomatoes than barrels of gasoline.

Americans spend more money on gasoline than tomatoes, on average.

Stagflation occurs when high inflation combines with

high unemployment and a low level of production.

low unemployment and a high level of production.

a drop in buying power and a rise in workers’ wages.

a rise in buying power and a drop in workers’ wages.

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?

Producers raise prices to continue to make a profit.

The government prints more money, lowering the value of money.

Workers negotiate with employers to receive more money.

Consumers need higher wages to keep up with rising prices.

When government intervention makes currency worthless, this condition is called

deflation.

hyperinflation.

cost-push inflation.

demand-pull inflation.

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

rising unemployment and inflation.

falling unemployment and inflation.

rising unemployment and falling inflation.

falling unemployment and rising inflation.

Typically, low inflation is a sign of

a healthy economy because it results from a steady rise in demand.

a healthy economy because it results from a steady rise in supply.

a struggling economy because it results from a steady fall in demand.

a struggling economy because it results from a steady fall in supply.

Hyperinflation can occur when

consumers begin purchasing more goods.

producers need more money to make and distribute goods.

companies raise prices to pass on costs to consumers.

the government prints a ton of money in order to pay off its debt.

Typically, low inflation is a sign of

a healthy economy because it results from a steady rise in demand.

a healthy economy because it results from a steady rise in supply.

a struggling economy because it results from a steady fall in demand.

a struggling economy because it results from a steady fall in supply.

Typically, high inflation is a sign of

a healthy economy because it results from a fall in production costs.

a healthy economy because it results from a rise in consumer interest.

a struggling economy because wages cannot keep up with the increase in prices.

a struggling economy because it results from a fall in consumer interest.

Stagflation occurs when high inflation combines with

high unemployment and a low level of production.

low unemployment and a high level of production.

a drop in buying power and a rise in workers’ wages.

a rise in buying power and a drop in workers’ wages.

Which is an effect of stagflation?

Trade with other economies increases.

The value of a country’s currency drops.

Prices for goods fall sharply and suddenly.

The GDP rises along with production levels.

When government intervention makes currency worthless, this condition is called

deflation.

hyperinflation.

cost-push inflation.

demand-pull inflation.

What is one consequence of stagflation?

The economy drastically slows down as money loses its buying power.

Producers cannot keep up with consumer interest and raise their prices.

There are not enough workers to meet the rising level of production.

Demand is too high and people spend more money than they should.

Which is the best definition of inflation?

a gradual decrease in the price of goods and services

a gradual increase in the price of goods and services

an exponential decrease in the price of goods and services

an exponential increase in the price of goods and services

Demand-pull inflation happens when the demand for goods

remains very low.

shifts up and down.

matches the supply.

increases.

What are the signs of high inflation? Check all that apply.