Chapter 31: Inflation and deflation
Multiple choice questions 1 The price of a product rises by 8% in 2016 and its weighted price change is 2%. In 2017, its rise in price falls to 5%, but its weighted price change increases to 2½%. What was the weight of the product in 2016 and 2017? 2016
2017
A
¼
½
B
½
¼
C
4
2
D
2
4
2 Who, among the following, is most likely to benefit during a period of rapid inflation? A Borrowers B Pensioners C Savers D Workers in strong unions 3 Which of the following is a possible cause of demand-pull inflation? A An increase in government expenditure, not matched by a rise in taxation B An increase in the price of oil, not matched by a fall in the price of other raw materials C A rise in wages, not matched by an increase in productivity D A rise in imports, not matched by a rise in exports 4 Which of the following must happen as a result of inflation? A A decline in uncertainty B A fall in the value of money C An improvement in the balance of payments D An increase in savings
Four-part question a Define inflation. (2) b Explain how a consumer boom could cause inflation. (4) c Analyse how inflation is measured. (6) d Discuss whether or not workers suffer as a result of inflation. (8)
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