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Inflation & Productivity – MCQs
24 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
According to the Phillips curve theory, when does unemployment revert to its natural rate?
When nominal wages match the wages that were anticipated
When real wages return to their equilibrium point
When the increase in nominal wages exceeds the inflation rate
When inflation surpasses the rate of nominal wage growth
2.
What do menu costs signify in the context of inflation?
Expenses related to seeking improved investment returns
Costs incurred when updating pricing information
Losses due to the rising value of money
Charges associated with adjusting the currency's value
Fees for changing interest rates
3.
What is the effect of a rise in production costs on the economy?
Cause a movement in aggregate demand
Cause a shift in aggregate supply
Lower the natural unemployment rate
Enhance worker productivity
Raise consumer spending
4.
What is the likely effect on the economy when injections into it increase?
Aggregate demand shifts outward, causing demand-pull inflation
Aggregate demand shifts outward, resulting in cost-push inflation
Aggregate supply shifts outward, leading to demand-pull inflation
Aggregate supply shifts outward, causing cost-push inflation
5.
Which of the following can trigger demand-pull inflation?
A rise in production expenses
A decrease in interest rates
A cutback in government expenditures
An increase in aggregate supply
None of the above
6.
If both borrowers and lenders agree on a nominal interest rate, but the actual inflation rate ends up being lower than expected, who benefits from this outcome?
Neither party benefits since the nominal rate is contractually fixed
All parties remain unaffected
Borrowers benefit while lenders lose out
Lenders benefit at the expense of borrowers
Inflation impacts both parties equally
7.
In which scenario would it be most advantageous for you to act as the lender?
The stated interest rate is 15% while inflation is at 14%
The stated interest rate is 20% with inflation reaching 25%
The stated interest rate is 12% and inflation is 9%
The stated interest rate is 5% and inflation is only 1%
8.
Which of the following statements accurately describes the relationship between nominal interest rate, real interest rate, and inflation?
None of the provided statements are true
Nominal interest rate equals inflation rate minus real interest rate
Real interest rate equals nominal interest rate minus inflation rate
Nominal interest rate equals real interest rate minus inflation rate
9.
What is the real interest rate when the nominal interest rate is 7% and the inflation rate is 3%?
4 percent
10 percent
-4 percent
3 percent
21 percent
10.
Based on Figure 24-1, what is the total worth of the basket during the base year?
Rs459.25
Rs418.75
Rs300
Not listed here
11.
What items make up the "basket" used to calculate the Consumer Price Index (CPI)?
Goods produced by consumers themselves
Items commonly bought by an average consumer
Raw inputs acquired by businesses
The entire output produced in the current period
None of the above
12.
The Consumer Price Index (CPI) was 124.0 in 1989 and increased to 130.7 in 1990. What was the inflation rate during this time frame?
5.4%
30.7%
It cannot be determined without the base year
5.1%
13.
What economic variables are illustrated by the Phillips curve?
Trade balance
Economic growth rate
Inflation rate
Joblessness
14.
Under what circumstance can unemployment temporarily drop below its natural rate in the short term?
When nominal wages increase at a slower pace than inflation
When nominal wages rise exactly in line with inflation
When nominal wages increase faster than the rate of inflation
When nominal wages grow less than the rate of unemployment
When nominal wages remain constant despite inflation
15.
Which factor can counterbalance the impact of inflation on a nation's product price competitiveness?
An increase in the value of the domestic currency
An official upward adjustment of the currency's value
A decline in the currency's exchange rate
Reduced inflation rates in foreign countries
Higher interest rates at home
16.
Under which condition is an increase in aggregate demand most likely to cause demand-pull inflation?
When aggregate supply is completely elastic
When aggregate supply is entirely inelastic
When aggregate supply has unit elasticity
When aggregate supply is fairly elastic
When aggregate supply is highly responsive
17.
What effect does inflation have?
Lowers the expenses required for daily life
Decreases the quality of life
Lowers the cost of goods
Diminishes the value of one rupee
18.
If employees and employers agree on a wage increase based on expected inflation, but the actual inflation rate surpasses their expectations, who benefits?
None of the above
Employees benefit while employers lose
Neither employees nor employers benefit since wages are fixed by the contract
Employers benefit at the expense of employees
Wages adjust automatically to actual inflation
19.
In which scenario would it be more advantageous for you to take out a loan?
The interest rate is 12% while inflation stands at 9%
The interest rate is 20% and inflation is 25%
The interest rate is 5% with inflation at 1%
The interest rate is 15% alongside a 14% inflation rate
20.
Given an inflation rate of 8% and a real interest rate of 3%, what is the nominal interest rate?
0.375 percent
5 percent
11 percent
24 percent
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