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Year 11 Exam  >  Year 11 Tests  >  Test: Inflation & Deflation - Year 11 MCQ

Test: Inflation & Deflation - Year 11 MCQ


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10 Questions MCQ Test - Test: Inflation & Deflation

Test: Inflation & Deflation for Year 11 2024 is part of Year 11 preparation. The Test: Inflation & Deflation questions and answers have been prepared according to the Year 11 exam syllabus.The Test: Inflation & Deflation MCQs are made for Year 11 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Inflation & Deflation below.
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Test: Inflation & Deflation - Question 1
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Which of the following is a primary cause of demand-pull inflation?

Detailed Solution for Test: Inflation & Deflation - Question 1
Demand-pull inflation occurs when there is an excess of demand in the economy. An increase in government spending is one of the components of aggregate demand, which can lead to higher overall demand and thus cause demand-pull inflation.
Test: Inflation & Deflation - Question 2
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How is the Consumer Price Index (CPI) used to measure inflation?

Detailed Solution for Test: Inflation & Deflation - Question 2
The CPI is used to measure inflation by tracking the prices of a fixed basket of goods and services that are typically bought by an average household. This helps to gauge inflation trends over time.
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Test: Inflation & Deflation - Question 3
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What happens when the inflation rate drops below zero percent?

Detailed Solution for Test: Inflation & Deflation - Question 3
Deflation is defined as a decrease in the general price level of goods and services in an economy, which occurs when the inflation rate drops below zero percent.
Test: Inflation & Deflation - Question 4
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Which policy is most effective in tackling demand-pull inflation?
Detailed Solution for Test: Inflation & Deflation - Question 4
Contractionary monetary policy is designed to reduce total (aggregate) demand by increasing interest rates and reducing the money supply, making it effective in tackling demand-pull inflation.
Test: Inflation & Deflation - Question 5
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Which of the following would likely result in cost-push inflation?
Detailed Solution for Test: Inflation & Deflation - Question 5
Cost-push inflation occurs when production costs increase, such as higher wages negotiated by trade unions, which lead to higher prices as firms pass on these costs to consumers.
Test: Inflation & Deflation - Question 6
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What is a consequence of demand-side deflation?
Detailed Solution for Test: Inflation & Deflation - Question 6
Demand-side deflation occurs due to a decline in aggregate demand, leading to decreased consumption as households and firms reduce their spending, which can further depress economic activity.
Test: Inflation & Deflation - Question 7
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Which component is not part of real Gross Domestic Product (rGDP)?
Detailed Solution for Test: Inflation & Deflation - Question 7
The real Gross Domestic Product (rGDP) is calculated as Consumption (C) + Investment (I) + Government spending (G) + Net Exports (X-M). Savings (S) is not a component of rGDP.
Test: Inflation & Deflation - Question 8
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How often is the household expenditure survey conducted to update the CPI basket?
Detailed Solution for Test: Inflation & Deflation - Question 8
The household expenditure survey is conducted annually to determine the contents of the CPI basket, reflecting changes in consumer spending patterns.
Test: Inflation & Deflation - Question 9
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Which of the following best describes supply-side deflation?
Detailed Solution for Test: Inflation & Deflation - Question 9
Supply-side deflation occurs when there are improvements in the productive capacity of the economy, such as increases in the quantity or quality of factors of production, leading to a surplus supply and lower general price levels.
Test: Inflation & Deflation - Question 10
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What is one potential drawback of contractionary policies used to reduce demand-pull inflation?
Detailed Solution for Test: Inflation & Deflation - Question 10
Contractionary policies, while effective in reducing demand-pull inflation, can also lead to lower output and higher unemployment as they decrease total (aggregate) demand in the economy.
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