Inflation 2281

A government reduces the interest rate to encourage economic growth.

Which other aim of government policy might now become more difficult to achieve?

• reducing a balance of trade in goods surplus

• reducing a government budget deficit

• reducing the level of unemployment

• reducing the rate of inflation

In July 2011 the monthly rate of inflation decreased to 2%. At that time it was expected that it would be 1% in August but would not continue to decline in September. If this occurred, what happened to prices in July, August and September?

• A

• B

• C

• D

Which is most likely to lead to a fall in the rate of inflation?

• a decrease in import prices

• a decrease in income tax

• an increase in consumer spending

• an increase in unemployment benefits

Consumer spending increased in 2010.

What other economic indicator is most likely to have increased as a result of the rise in consumer spending?

• government budget deficit

• inflation

• terms of trade

• unemployment

What is deflation?

• a falling general price level

• a falling wage level

• a rising output level

• a rising profit level

In 2013 there was a period of low interest rates and high inflation in an economy.

Who would be most likely to benefit and who most likely to lose during such a period?

• A

• B

• C

• D

When might rapid inflation together with low interest rates be a source of concern for a consumer?

• when a consumer lives on a pension linked to the consumer price index

• when a consumer needs to use savings for regular expenditure

• when a consumer pays a fixed rent for their accommodation

• when a consumer wishes to buy a good on credit

What is most likely to cause a fall in the rate of inflation?

• an increase in consumer spending

• an increase in import prices

• an increase in income tax

• an increase in wage rates

Who is most likely to benefit during a period of inflation?

• creditors (lenders)

• debtors (borrowers)

• fixed income earners

• holders of cash

In 2009, a country had an inflation rate of 2%. The table shows the inflation rate in the following years. In which year did deflation start?

• 2010

• 2011

• 2012

• 2013