Deck 50: Inflation

Question 1

Whats defention of terms:
-cost-push inflation

Answer 1

inflation caused by input costs, including high wages and salaries

Question 2

Whats defention of terms:
-demand-pull inflation

Answer 2

traditional inflation caused by the upward pull of aggregate demand

Question 3

Whats defention of terms:
-effective demand

Answer 3

the aggregate demand in money terms, including both desire for products and the money for products

Question 4

Whats defention of terms:
-inflation

Question 5

Whats defention of terms:
-oligopoly

Question 6

Whats defention of terms:
-profit-push inflation

Question 7

Whats defention of terms:
-repressed inflation

Question 8

Whats defention of terms:
-stagflation

Question 9

Describe how inflation is measured and, given appropriate data, calculate inflation.
-What are two measures of price levels introduced in this chapter? How are they similar; how are they different?

Question 10

Describe how inflation is measured and, given appropriate data, calculate inflation.
-Assume the CPI rose from 117 to 123 between 2005-2006. What was the inflation rate?

Question 11

Compare and contrast the different causes of inflation.
-In most cyclical expansions, do prices go up or down? Why?

Question 12

Compare and contrast the different causes of inflation.
-What happens to prices in a major war situation? Why

Question 13

Explain why there has been inflation in every recession of the last fifty years.
-What has happened to prices in recessions since the 1950s? Why?

Question 14

Explain why there has been inflation in every recession of the last fifty years.
-In most cyclical recessions up until the 1950s, did prices go up or down? Why?

Question 15

Compare and contrast price movements in competitive markets and monopoly/oligopoly markets.
-What are the differences between a competitive market and monopoly/oligopoly markets? How does that impact prices and price formation?

Question 16

Compare and contrast price movements in competitive markets and monopoly/oligopoly markets.
-Describe differences in historical price movements between competitive and monopoly/oligopoly markets?

Question 17

Explain the relationship of oligopolies and profit-push inflation.
-Describe how monopoly/oligopoly firms protect their profits. Can a firm owner in a competitive market do this? Explain.

Question 18

Explain the relationship of oligopolies and profit-push inflation.
-What is profit-push inflation?

Question 19

Explain the goal of wage and price controls.
-Why would wage and price controls be used? What are the "controls" attempting to control?

Question 20

Explain the goal of wage and price controls.
-Describe historical examples of wage and price controls. Were they effective?

Question 21

Compare and contrast the criticisms of price controls by conservative and progressive economists.
-What are conservative criticisms of price and wage controls? Progressive criticisms? How are they similar? Different?

Question 22

Inflation is defined as

A) an increase in the quantity of goods in the consumer's basket.
B) an increase in the level of GDP.
C) an increase in the price of an important good like gasoline.
D) an increase in the overall level of prices.

Question 23

The annual rate of inflation is typically measured by

A) a percentage increase in the price of gasoline and other basic commodities.
B) the difference in the Consumer Price Index from one year to the next.
C) the percentage change in the Consumer Price Index.
D) the increase in the real GDP.

Question 24

Which group of people is likely to be the most concerned about inflation?

A) individuals whose wages are indexed to the rate of inflation.
B) businesses selling goods that are relatively price inelastic.
C) Retirees on a fixed income.
D) Corporations with a significant degree of monopoly power.

Question 25

Inflation that is driven by the rising cost of inputs including wages and salaries is called

A) demand-pull inflation.
B) cost push inflation
C) stagflation.
D) profit push inflation

Question 26

During World War II, the government imposed legal controls on prices. As a result there was

A) no inflation at all.
B) repressed inflation.
C) stagflation.
D) demand-pull inflation

Question 27

The Keynesian explanation of inflation is that

A) it is caused by aggregate demand rising faster than aggregate supply.
B) it is caused by aggregate supply rising faster than aggregate demand.
C) it is caused by an expansion of the money supply.
D) it is caused by rising costs of production during a time of deficient aggregate demand.

Question 28

A prominent conservative view of inflation is that

A) it is caused by high input costs, included high wages and salaries.
B) it is caused by a deficiency of aggregate demand.
C) it is caused by productivity rising faster than wages.
D) it is caused by excess aggregate demand.

Question 29

The term, "stagflation," refers to

A) inflation accompanied by low unemployment.
B) inflation at a time of excess aggregate demand.
C) inflation accompanied by high unemployment.
D) inflation caused by an expansion of the money supply.

Question 30

Keynesian theory predicts that inflation

A) will rise during expansions and rise during recessions.
B) will fall during expansions and rise during recessions.
C) will fall during expansions and fall during recessions.
D) will rise during expansions and fall during recessions.

Question 31

The phenomenon of inflation during recessions

A) is explained by progressive economists as "demand-pull" inflation.
B) does not occur.
C) is explained by conservative economists as "cost-push" inflation.
D) is caused by wage and price controls.

Question 32

What are administered prices?

A) prices that are determined by market forces.
B) prices that are determined by the government.
C) prices that are determined by corporations in the oligopoly sector.
D) prices that are different for large buyers than for individual consumers.

Question 33

Gardiner Means examined the behavior of prices during the Great Depression and found that

A) prices in the oligopoly sector declined much more than prices in the competitive sector.
B) prices in the oligopoly sector declined very little compared to prices in the competitive sector.
C) prices in the oligopoly sector declined at about the same rate as prices in the competitive sector.
D) prices in the oligopoly sector fell while prices in the competitive sector rose.

Question 34

Gardiner Means examined the relationship between prices and output during the Great Depression and found that

A) oligopoly industries maintained prices by greatly reducing output.
B) oligopoly industries lowered prices by increasing output.
C) oligopoly industries increased prices through sheer monopoly power.
D) oligopoly industries greatly reduced prices and managed to maintain production levels.

Question 35

The US government implemented wage and price controls during World War II because

A) there was a significant increase in the production of consumer goods.
B) there was a significant reduction in the production of consumer goods.
C) there was a major increase in demand by government for consumer goods.
D) consumer goods manufacturers were worried about falling prices of consumer goods.

Question 36

The only case of wage and price controls in the US during peacetime occurred

A) during the Kennedy-Johnson administration.
B) during the administration of William Clinton.
C) during the administration of President Nixon.
D) during the administration of President Galbraith.