Unit 2

What is inflation?

• When the general level of prices rise

• When the general level of prices falls

• When prices rise rapidly in response to an event

• When a very small increase stimulates the economy

Is all inflation bad?

• Yes, any increase in prices is bad

• No, a very small increase can stimulate the economy

• Yes, inflation always leads to hyperinflation

• No, inflation only affects certain goods

What does the Consumer Price Index (CPI) measure?

• The cost of living index

• The amount of goods ordered for a store

• The prices of a set of goods over a period of time

• The overall health of the stock market

What is GDP?

• The total dollar value of all finished goods and services produced in a country in a given time period

• The total population of a country divided by its GDP

• The average income per person in a country

• The total number of unemployed individuals in a country

__________ refers to a decrease in price level.

• Hyperinflation

• Disinflaation

• Deflation

• Stagflation

Who is most likely to be hurt by inflation?

• someone who borrowed money
• a retiree on a fixed income
• a business owner
• the U.S. government

When prices increase very rapidly

• Stagflation

• Inflation

• Deflation

• Hyperinflation

A good that lasts three years or more when used on a regular basis is called a

• Capital Good
• Consumable Good
• Nondurable Good
• Durable Good

Which of the following is considered a nondurable good?

• John Deere tractor

• automobile

• dishwasher

• toilet paper

Which of the following is a durable good?

• washing machine

• t-shirt

• chocolate bar

• shampoo