Deck 14: Inflation

Question 1

In World War II, government spending for the war

A) was approximately 4% of GDP.
B) was financed entirely by increased taxes.
C) was approximately 40% of GDP.
D) was financed entirely from the surplus accumulated during the Great Depression.

Answer 1

C

Question 2

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.

Answer 2

C

Question 3

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.

Answer 3

C

Question 4

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 5

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 6

The Keynesian explanation of inflation is that it is caused by

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

Question 7

A prominent conservative view of inflation is that it is caused by

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

Question 8

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 9

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 10

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 11

The U.S. 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.