Economics Question Worksheet - Topic 8 ____________________________________________________________________ Name: Date: ____________________________________________________________________ Topic: INFLATION AND TYPES OF INFLATION ____________________________________________________________________ Multiple Choice 1. The Consumer Price Index (CPI) measures: a) b) c) d) actual prices of a basket of goods and services changes in the demand for all consumer goods changes in the price of a weighted basket of goods and services the rate of increase in the general level of prices
2.
In Russia, the CPI at the start of a particular year was 132.5 as measured by the International Monetary Fund. An inflation rate of 4.2% was recorded for this year. What is the CPI at the end of this year? a) b) c) d) 120.4 126.9 132.5 138.1
3.
An inflationary gap indicates that: a) b) c) d) inflation must have occurred from an increase in cost factors the level of aggregate demand is in excess of the full employment level of output the economy must be at equilibrium there is a surplus of supply over demand
4.
Which of the following may increase Sweden’s rate of inflation? a) b) c) d) an appreciation of the Swedish krona (Sweden’s currency) the introduction of a new consumption tax on all goods and services an increase in the productivity of workers without any wage increase none of the above
5.
Inflation in Japan which is ‘overseas induced’ could be a result of: a) b) c) d) higher foreign investment into Japan an increase in the price of imported steel strong world demand for Japanese cars all of the above
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Economics Question Worksheet - Topic 8 ____________________________________________________________________ 6. Which of the following combination of events would most likely cause the rate of inflation to increase in France? a) b) c) d) a drought causing the supply of wine to fall AND strong growth in the tourism sector nationwide recession AND a series of terrorist attacks on Paris worldwide recession AND wage increase demands by police structural change reducing business costs AND a period of high overseas inflation
7.
Stagflation refers to: a) b) c) d) rising unemployment and falling prices rising unemployment and rising prices falling unemployment and falling prices falling unemployment and rising prices
Short Answer 8. Define Inflation.
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10.
The Malaysian economy underwent a period of high economic growth from 1990 to 1998. What kind of inflation would this cause and why?
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Economics Question Worksheet - Topic 8 ____________________________________________________________________ 11. Outline three sources of demand pull inflation, giving a brief explanation for each of them. ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________
12.
Draw the Keynesian Cross diagram to model demand pull inflation. In addition, explain the movements which occur on your diagram.
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Economics Question Worksheet - Topic 8 ____________________________________________________________________ 13. Draw an appropriate model which demonstrates cost push inflation. Label and explain your diagram carefully.
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14.
As a result of international conflicts in the Middle East, there is a worldwide shortage of oil. Explain what impact this could have on the general level of prices in a country like Australia which relies heavily on imported oil.
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