Inflation and Bubbles

What is the effect of inflation on purchasing power?

• It increases purchasing power

• It decreases purchasing power

• It has no effect on purchasing power

• It depends on the rate of inflation

How do economists measure inflation?

• By analyzing stock market trends

• By calculating the average price of goods and services

• By monitoring government spending

• By conducting surveys of consumer preferences

What is the Consumer Price Index (CPI) used for?

• To determine the highest grossing movies of all time

• To adjust prices from the past into today's dollars

• To calculate the rate of inflation

• To measure the purchasing power of consumers

What is the main cause of inflation known as Demand Pull Inflation?

• An increase in production costs

• A decrease in the availability of resources

• Too much money chasing too few goods

• A decrease in consumer spending

What is the main cause of inflation known as Cost Push Inflation?

• An increase in consumer spending

• A decrease in production costs

• Too much money chasing too few goods

• A decrease in the availability of resources

What is a bubble in economics?

• A sudden increase in the price of a specific good

• A rapid decrease in the price of a specific good

• An unsustainable increase in the price of an asset

• An unsustainable decrease in the price of an asset

What is an example of a bubble in history?

• The stock market bubble in the late 1990s

• The rise in home prices in the early 2000s

• The Dutch tulip mania in the 1630s

• All of the above

Why is it important to understand inflation?

• To negotiate a higher salary

• To make informed financial decisions

• To understand economic trends

• All of the above