Free Practice Quiz Question List

3 Understanding Inflation Online Quiz Questions

Use this free practice quiz with 20 questions to review 3 Understanding Inflation, test your knowledge, and prepare for your next test or exam.

20 questions

Fill in the blank

1 point

Inflation is a sustained increase over time in the of goods and services in an economy.

True or false

1 point

A sharp increase in the price of gasoline, by itself, is enough to establish that the economy is experiencing inflation.

A
True
B
False

Choose one

1 point

The inflation rate falls from $6\%$ to $2\%$ , and remains above zero. What does this indicate about the overall price level?

A
Prices are falling across the economy.
B
Prices are still rising, but more slowly.
C
Prices are unchanged.
D
The economy is necessarily experiencing deflation.

Choose one

1 point

Which description best explains what the Consumer Price Index (CPI) measures?

A
It tracks every item sold in the United States and gives each item equal weight.
B
It tracks only goods produced in the United States, including exports.
C
It tracks a representative basket of consumer purchases, with categories weighted by their importance in consumer spending.
D
It measures the cost of living for every household individually.

Fill in the blank

1 point

To approximate inflation-adjusted growth, subtract the from nominal growth.

Choose one

1 point

A price index rises from $200$ to $206$ . Using the percentage change from the earlier index value, what is the inflation rate over this period?

A
$3\%$
B
$6\%$
C
$30\%$
D
$103\%$

Choose all

1 point

Select all statements that accurately describe possible causes or contributors to inflation.

A
Overall spending grows faster than the economy’s ability to produce goods and services.
B
Production costs rise or supplies become scarce, prompting firms to raise prices or reduce output.
C
Expectations cannot influence future price or wage decisions.
D
A rise in the price of one item automatically proves that overall inflation is occurring.

Choose all

1 point

Select all statements that describe possible effects of unexpected inflation on people with fixed-rate debt.

A
Borrowers with fixed-rate debt may repay with money worth less than expected.
B
Lenders may receive less purchasing power than they anticipated.
C
Every borrower and lender benefits equally from unexpected inflation.
D
Unexpected inflation guarantees that lenders receive more purchasing power than expected.

Written response

1 point

A price index rises from $200$ to $206$ . Calculate the inflation rate as $\frac{\text{later index}-\text{earlier index}}{\text{earlier index}}\times100\%$ . Enter the numerical percentage-point value without the % sign.

Written response

1 point

Households and businesses try to buy more cars, but production cannot increase quickly. What type of inflation describes price increases driven by overall spending growing faster than production capacity?

True or false

1 point

When businesses and workers expect prices to keep rising, their price and wage decisions can help inflation persist.

A
True
B
False

Open ended

1 point

A sudden rise in household and business spending occurs while factories are already near capacity, and fuel costs also increase across industries. Explain how each development could contribute to inflation, name the type of inflation associated with each, and describe how expectations could help inflation continue.

Choose one

1 point

The inflation rate falls from 6% to 2% and remains positive. What happens to the overall price level?

A
Prices are falling because the inflation rate is lower.
B
Prices are still rising, but more slowly.
C
The overall price level has stopped changing.
D
Every household’s costs are falling.

True or false

1 point

A sharp increase in the price of gasoline by itself is enough to show that the economy is experiencing inflation.

A
True
B
False

Choose one

1 point

Why might a change in housing prices affect the CPI differently from the same-sized price change in a category that represents a smaller share of consumer spending?

A
It gives every item the same weight so the index is easy to calculate.
B
It tracks only items whose prices are rising.
C
It gives categories different weights to reflect their importance in consumer spending.
D
It measures only the prices paid by businesses.

Written response

1 point

Which price index tracks prices of goods and services produced in the United States, including exports but excluding imports?

Choose one

1 point

Households and businesses increase their spending on cars, but manufacturers cannot quickly increase production. Which explanation best fits a resulting broad rise in prices?

A
Prices rise because a key production input becomes more expensive.
B
Prices rise as buyers try to purchase more than producers can supply quickly.
C
Prices fall because households postpone purchases.
D
Prices rise only because the CPI basket is reweighted.

Choose one

1 point

An economy produces the same quantities of goods and services as before, but their prices rise. Which outcome is consistent with the difference between nominal and real GDP?

A
Both nominal and real GDP must stay unchanged because production is unchanged.
B
Nominal GDP can rise while real GDP stays unchanged.
C
Real GDP rises while nominal GDP stays unchanged.
D
Both nominal and real GDP must rise by the same amount.

Choose one

1 point

Businesses and workers expect prices to keep rising. How could those expectations help inflation persist?

A
Expected price increases can influence firms’ prices and workers’ wage requests, helping inflation persist.
B
Expectations prevent firms from changing prices until costs fall.
C
Expected price increases affect wages but cannot affect firms’ pricing decisions.
D
Expectations matter only when every price rises at the same rate.

Written response

1 point

A price index rises from 200 in an earlier period to 206 in a later period. What is the inflation rate over that period?

3 Understanding Inflation Online Quiz Questions

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