A level Inflation Quiz 1

16 Questions

Quiz Description

In this economics quiz, we shall be looking at inflation. We all know about inflation being a general increase in price and a fall in the purchasing value of money. But in this quiz, we are going to take the study even further by looking at the value of money, consumer price index, consumption expenditure, causes, and types of inflation. Before moving any further, let’s have a recap of what inflation is:

Inflation refers to the rate at which the value of a currency is dropping and thus the general level of prices for goods and services is increasing. The most commonly used inflation indices are the Wholesale Price Index (WPI) and the Consumer Price Index (CPI). We have 3 types of inflation which are Demand-Pull, Cost-Push, and Built-In inflations. Demand-Pull inflation has to do with the increase in the price levels as a result of aggregate demand in an economy strongly outweighing the aggregate supply. Cost-Push inflation occurs when the prices of goods and services increase as a result of an increase in the cost of wages and raw materials. Lastly, Built-In inflation is a type of inflation that results from past events and continues in the present.

There is so much to discover about inflation. If you are interested in having this knowledge, take this quiz and explore more exciting facts. Good luck as you practice. 

1:

 The purchasing power of money or value of money varies 


Correct
  • 1:
    Directly with the interest rate
  • 2:
    Directly with the price level
  • 3:
    Directly with the volume of employment
  • 4:
    Inversely with the price level
2:

 Inflation helps in redistribution of income through 


Correct
  • 1:
    Proportional change in prices of everything, including prices of assets and debt instruments
  • 2:
    Disproportional change in prices of everything including prices of assets and debt instruments
  • 3:
    Rising prices of everything, including prices of assets and debt instruments
  • 4:
    Falling prices of everything, including prices of assets and debt instruments
3:

 The consumer price index is designed to measure the degree to which 


Correct
  • 1:
    Incomes are distributed among the poor and rich over time
  • 2:
    The cost of purchasing a basket of consumer goods has changed with time
  • 3:
    Consumption patterns have changed with time because of higher price
  • 4:
    Consumer prices have risen relative to the wage level in the economy
4:

 To know whether the rich are getting richer and the poor are getting poorer, it is necessary to compare 


Correct
  • 1:
    The consumer price index over different periods of time for different regions
  • 2:
    The distribution of income between two sets of income recipients to different periods of time
  • 3:
    The distribution of income between two different sets of income recipients at the same point of time
  • 4:
    The availability of food grain among two sets of people, one rich and the other poor, over different periods of time
5:

  Share of food items in total consumption expenditure has reduced in the last two decades because 


Correct
  • 1:
    People have been purchasing less food
  • 2:
    People have been preferring non-food items in their food basket
  • 3:
    The availability of food grains has reduced in the country
  • 4:
    Income level of people have increased
6:

 A low rate of inflation is considered necessary for economic growth. Why? 


Correct
  • 1:
    It acts as an incentive to boost supply in the economy
  • 2:
    It indicates that the currency is in continuous demand by the people
  • 3:
    It affects only the rich and not the poor
  • 4:
    It affects only the rich and not the poor
7:

 Which one of the following statements refers to “disinflation”? 


Correct
  • 1:
    A simultaneous existence of high rate of inflation and high unemployment in a country
  • 2:
    A process of reversing inflation but without creating unemployment and reducing output
  • 3:
    A policy of moderating rising prices and also to pull the system out of economic slowdown
  • 4:
    A situation of recession caused by severe deficiency of effective demand
8:

 Consider the following statements: 

1. All inferior goods are Giffen goods

2. All increase in income results in lower demand for an inferior good

 Which of the statements given above is/are correct? 


Correct
  • 1:
    1 only
  • 2:
    2 only
  • 3:
    Both 1 and 2
  • 4:
    Neither 1 nor 2
9:

 When there is a fall in the prices in an economy, it may lead to which of the following?  

  1. Increase in the demand for consumer goods
  2. Rise in the interest rates
  3. Increase in exports

 Select the correct answer using the codes given below: 


Correct
  • 1:
    1 only
  • 2:
    1 and 2 only
  • 3:
    1 and 3 only
  • 4:
    1, 2 and 3
10:

 Which of the following factors contribute towards demand-pull inflation?  

  1. Increase in government expenditure
  2. Rising population and household consumption
  3. Increase in income level
  4. Fluctuations in output and supply
  5. Increase in administered prices

 Select the correct answer using the codes given below: 


Correct
  • 1:
    1, 2 and 3 only
  • 2:
    1 and 2 only
  • 3:
    2, 3 and 4 only
  • 4:
    1, 2, 3, 4 and 5
11:

 Consider the following statements:  

  1. Reduction in the reverse repo rate can be used to combat inflation
  2. Purchasing power of money reduces on account of inflation
  3. Inflation favours the debtors

 Select the correct answer using the codes given below: 


Correct
  • 1:
    1 only
  • 2:
    1 and 2 only
  • 3:
    2 and 3 only
  • 4:
    1, 2, and 3
12:

  Economists are faced with the problem of selecting items for the consumer price index. The index number is expected to measure the general changes in the price level of a basket of commodities. Which of the quality/qualities listed below should be taken care of while selecting the commodities?  

  1. The items should be representative of the tastes, habits, customs, and necessities of the people to whom they relate.
  2. The items should be adequate in number and importance
  3. The items should be moderately priced.

Select the correct answer using the codes given below:


Correct
  • 1:
    1, 2 and 3
  • 2:
    1 and 2 only
  • 3:
    1 only
  • 4:
    2 and 3 only
13:

 Which of the following are the effects of inflation in the economy?

  1. With the same level of wages, the purchasing power of people gets reduced.
  2. The high inflation rate reduces the real value of savings of people
  3. Inflation leads to increase in the real rate of interest

Select the correct answer using the code given below:


Correct
  • 1:
    1 and 3 only
  • 2:
    2 and 3 only
  • 3:
    1, 2 and 3
  • 4:
    1 and 2 only
14:

 Which among the following are the causes of cost-push inflation?

  1. Deficit financing
  2. Increase in administered prices
  3. Increase in interest rates
  4. Increase in population
  5. Increase in oil prices

Select the correct answer using the codes given below:


Correct
  • 1:
    2, 3, 4 and 5
  • 2:
    1, 3 and 5
  • 3:
    3 and 5 only
  • 4:
    1, 2, 4 and 5
15:

 Consider the following statements:

  1. A uniform market across the nation helps in controlling inflation levels in goods and services.
  2. Supply side factors usually take a longer time period than the demand side factors to adjust
  3. Agencies engaged in the management of money supply can affect demand side factors to influence inflation levels in economy

Select the correct answer using the codes given below:


Correct
  • 1:
    1 and 3 only
  • 2:
    2 and 3 only
  • 3:
    1 and 2 only
  • 4:
    1, 2 and 3
16:

 Consider the following statements:

  1. The wholesale price index gives more weightage to the primary products because of the dominant role of agriculture in the Indian economy
  2. The consumer price index gives more weightage to manufactured articles on account of change in demand pattern in the economy

Which of the statements given above/is are correct?


Correct
  • 1:
    1 only
  • 2:
    2 only
  • 3:
    Both 1 and 2
  • 4:
    Neither 1 nor 2

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A level Inflation Quiz 1
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