Y10 Economics - C31 Inflation and Deflation

What is inflation?

• A continuous rise in the general price level of goods and services

• A continuous fall in the general price level of goods and services

• A sudden increase in the value of money

• A decrease in consumer demand

What does CPI stand for?

• Consumer Purchasing Index

• Consumer Price Index

• Cost Price Indicator

• Central Price Index

What is hyperinflation?

• A decrease in the money supply

• A gradual increase in prices over time

• A very high rate of inflation that is out of control

• A stable price level in the economy

What is benign deflation?

• A sudden drop in prices due to economic collapse

• Harmful deflation caused by lower demand

• A stable price level in the economy

• Non-threatening deflation caused by higher supply

What is one cause of cost-push inflation?

• Decreased money supply

• Lower interest rates

• Increased consumer demand

• Higher costs of production

What happens to purchasing power during inflation?

• It increases

• It decreases

• It remains the same

• It fluctuates wildly

What is a consequence of deflation?

• Higher consumer spending

• Increased unemployment

• Stable prices

• Increased business profits

What is the effect of inflation on lenders?

• They benefit from lower interest rates

• They lose because the money lent becomes worth less

• They gain because they receive more money back

• Their profits remain unchanged

What is one method to control inflation?

• Increasing the money supply

• Lowering taxes

• Increasing government spending

• Raising interest rates

What does a price index of 115.2 indicate?

• Prices have remained the same since the base year

• Prices have increased by 15.2% since the base year

• Prices have decreased by 15.2% since the base year

• Prices have doubled since the base year