Inflation and Stagflation Answers
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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 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.3
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.4
Which is the best definition of inflation?
A
a gradual decrease in the price of goods and servicesB
a gradual increase in the price of goods and servicesC
an exponential decrease in the price of goods and servicesD
an exponential increase in the price of goods and services5
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
A
rising unemployment and inflation.B
falling unemployment and inflation.C
rising unemployment and falling inflation.D
falling unemployment and rising inflation.6
Demand-pull inflation happens when the demand for goods
A
remains very low.B
shifts up and down.C
matches the supply.D
increases.7
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.8
What are the signs of high inflation? Check all that apply.
A
Production begins to fall.B
Production begins to rise.C
Interest rates decrease.D
Interest rates increase.E
Purchasing power falls.F
Fewer fixed rate bank loans.9
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.10
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