EC:083

"Too much cash chasing too few goods" is a description of a. hyperinflation b. cost-push inflation c. demand-pull inflation d. deflation

demand-pull inflation

Which of the following is a category of prices measured by the Producer Price Index: a. Apparel b. Intermediate goods c. Food and beverages d. Services

intermediate goods

What often happens to an economy during a mildly inflationary period? a. Decreased profits b. Decreased prosperity c. Increased unemployment d. Increased growth

increased growth

Long-term inflation is ultimately caused by significant, persistent increases in a. the money supply. b. aggregate market supply. c. diminishing returns. d. consumer purchasing power.

the money supply

Why is price stability an effective measurement of the state of the economy? a. Indicates positive and negative trends b. Matches the effects with the causes c. Reflects the rise in wages and benefits d. Compares revenues with expenses

Indicates positive and negative trends

One way that inflation impacts businesses is by a. increasing productivity b. increasing prices c. decreasing labor costs. d. decreasing free trade.

increasing prices

Which of the following is a true statement regarding inflation and lending: a. Inflation benefits borrowers over lenders b. Inflation affects home loans more than other types of loans c. Higher inflation makes loans easier to get d. Lenders do not consider inflation when offering loans

inflation benefits borrowers over lenders

Most economists agree that inflation occurs when a. currency exchange rates fluctuate. b. the money supply grows faster than the economy does. c. there is too much competition in the marketplace. d. there is not enough consumer demand.

the money supply grows faster than the economy does

Which of the following is a true statement regarding the Consumer Price Index: a. It gauges the costs of compensating employees b. It does not measure the prices of health care c. It applies only to businesses d. It measures inflation based on a representative section of consumer products

It measures inflation based on a representative section of consumer products

When a fire or natural disaster limits commodities, it is referred to as a. deflation. b. demand pull. c. inflation. d. supply shock.

supply shock

Which type of inflation is harmful to the economy? a. Demand-pull inflation b. Negative inflation c. Cost-push inflation d. Hyperinflation

Hyperinflation

Which of the following is a true statement regarding hyperinflation's effect on businesses: a. Hyperinflation raises the value of the products a business exports b. Hyperinflation lowers interest rates, making business expansion easier c. Hyperinflation is good for businesses because prices go up d. Hyperinflation makes running a business more difficult and unpredictable

Hyperinflation makes running a business more difficult and unpredictable

Which of the following is a true statement regarding inflation's effects on the economy: a. Interest rates influence the inflation rate b. Inflation does not affect everyone equally c. Inflation hits gas prices before anything else d. The effects of inflation are worse for businesses than for individuals

Inflation does not affect everyone equally

Which of the following is a true statement regarding inflation: a. It is always caused by consumer demand b. It does not affect everyone in the economy c. It impacts only low-income consumers d. It is a general trend in which some prices may go down

It is a general trend in which some prices may go down

Why is deflation bad for the economy? a. It causes shortages of goods b. It raises prices for both consumers and businesses c. It encourages too much spending d. It reduces output and can lead to layoffs

It reduces output and can lead to layoffs

High levels of inflation often have a negative effect on a business's a. import quota b. purchasing power c. credit rating d. secondary market

Purchasing power

Which of the following is a benefit of low, controlled inflation: a. The strength of labor unions b. The reduced purchasing power of the dollar c. The scarcity of certain commodities d. The government's ability to adjust interest rates

The government's ability to adjust interest rates

Which of the following is a reason that businesses monitor inflation: a. To report to investors b. To avoid deflation c. To negotiate labor contracts d. To set inflation-targeting goals

To negotiate labor contracts

Some of the negative effects of inflation are offset by its positive benefit of a. boosting employment. b. lowering the value of exports. c. increasing prices. d. raising interest rates.

boosting employment

When prices don't change rapidly and the value of money is stable, it results in a. consumer confidence. b. cost-push inflation. c. lower employment. d. economic depression.

consumer confidence

Limited commodities can cause a. inflation targeting b. demand-pull inflation c. cost-push inflation d. price stability

cost-push inflation

Inflation influences the balance of trade between countries through its effect on a. the Consumer Price Index b. currency exchange rates c. menu costs d. the availability of commodities

currency exchange rates

When inflation levels are low, businesses often consider a. reducing their personnel b. increasing interest rates c. decreasing outputs d. expanding their operations

expanding their operations

The U.S. government aims to keep inflation at 2%. This is called a. price stability b. inflation targeting c. hyperinflation d. deflation

inflation targeting

When inflation is unexpected, it may be difficult for businesses to a. keep employees' wages on pace with rising prices b. create a bigger money supply c. pay rising taxes d. avoid a sudden turn into deflation

keep employees' wages on pace with rising prices

Inflation has driven up prices at Allen's business, forcing him to reprint all his price lists and send notices out to clients. These expenses are known as a. price indexes b. commodities c. menu costs d. sampling errors

menu costs

The main goal of inflation targeting is a. an increase in the money supply b. a decrease in the inflation rate c. deflation d. price stability

price stability

The main result of inflation is a. pushing most prices down b. reducing the purchasing power of the dollar c. making everyday products unaffordable d. increasing consumer demand

reducing the purchasing power of the dollar

The Consumer Price Index is used as a general indicator of inflation, rather than a specific measurement, because it a. applies only to businesses b. represents about 87% of the population c. measures only rural populations d. contains a greater number of errors than most research studies

represents about 87% of the population.

When inflation is out of control, consumers do not a. purchase imports from other countries b. join labor unions at work c. buy the amount of goods they should d. save and invest as much as they should

save and invest as much as they should