Inflation, CPI, and the Market basket

When Inflation occurs,

• Price decreases in the economy
• The purchasing power of money decreases in the economy
• The dollar appreciates on foreign exchange markets
• Basic necessities become cheaper

__________ are common products that consumers buy in a month.(used for CPI)

• market basket
• inflation
• fiscal policies
• monetary policy

Money loses its value when it

• There is too much of it in the economy

• There is not enough of it in the economy

• is divisible
• is durable

Someone buys a house with a 30 year fixed rate loan

• helped by inflation
• hurt by inflation

A _______________ is a hypothetical set of consumer purchases of goods and services.

• Market Basket
• Aggregate Price Level
• Consumer Price Index (CPI)
• Producer Price Index (PPI)

Which explanation best explains the effects of inflation?

• Consumers have more products to choose from.

• Inflation erodes (take away from) the purchasing power of the dollar.

• Inflation results in lower prices.

• Demand increases because prices are higher.

Which of the following causes of inflation is often described as “too much money chasing too few goods”?

• Demand-pull inflation

• Cost-push inflation

• Demand-push inflation

• Cost-pull inflation

Fill in the blank: When inflation is high the _______________of the dollar decreases.

• cost value

• purchasing power

• importance

• validity

An index that measures the prices of a market basket of goods that typical consumers purchase.

• Consumer Price Index
• Federal Reserve
• Bank
• Deflation

According to the wage-price spiral, if a company gives a worker a raise in pay, what must they also do?

• Raise the price of their products

• go out of business

• lower the price of their products

• merge with a competitor