Lesson M2.4.1

M2.4.1 Inflation, deflation, real and nominal values and price indices Quiz: OCR Economics, Unit 7

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M2.4.1, Inflation, deflation, real and nominal values and price indices: 20 multiple choice questions for the OCR Economics (H460), Unit 7: Economic policy objectives, written with Revision Ninja.

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The 20 questions

  1. Which measure of inflation includes council tax and mortgage interest payments in the UK?

    • CPIH
    • Retail Prices Index
    • Producer Price Index
    • Consumer Prices Index

  2. What term describes a persistent fall in the general price level across an economy?

    • Disinflation
    • Deflation
    • Stagflation
    • Hyperinflation

  3. What term describes a slowdown in the rate at which prices are rising?

    • Deflation
    • Disinflation
    • Stagflation
    • Reflation

  4. What is the target rate of annual CPI inflation set for the Bank of England?

    • 2.5%
    • 3%
    • 2%
    • 1%

  5. What is the main official measure of inflation used for the UK target?

    • Consumer Prices Index
    • CPIH
    • GDP deflator
    • Retail Prices Index

  6. Which index measure includes owner-occupiers' housing costs alongside standard CPI items?

    • GDP deflator
    • CPIH
    • RPIX
    • RPI

  7. What formula converts a nominal economic value into a real economic value?

    • Nominal value x Index
    • Nominal value / Index
    • Index / Nominal value
    • Nominal value + Index

  8. If nominal GDP grows by 5% and inflation is 2%, what is real GDP growth?

    • 10%
    • 2.5%
    • 3%
    • 7%

  9. What survey is used by the ONS to determine the typical UK household basket weights?

    • Census Survey
    • Labour Force Survey
    • Business Register Survey
    • Living Costs Survey

  10. What type of inflation is caused by an increase in aggregate demand exceeding productive capacity?

    • Cost-push inflation
    • Imported inflation
    • Demand-pull inflation
    • Wage-price inflation

  11. What type of inflation is triggered by rising costs of raw materials and production inputs?

    • Monetary inflation
    • Cost-push inflation
    • Demand-shift inflation
    • Demand-pull inflation

  12. If a price index rises from 100 to 125, what is the inflation rate?

    • 25%
    • 2.5%
    • 125%
    • 20%

  13. What cost refers to the extra time and effort spent comparing prices during high inflation?

    • Menu costs
    • Administrative costs
    • Transaction costs
    • Shoe leather costs

  14. What cost refers to the expense firms incur when updating listed prices due to inflation?

    • Capital costs
    • Raw material costs
    • Menu costs
    • Shoe leather costs

  15. What happens to the real value of fixed-rate debt during periods of high inflation?

    • It falls
    • It stays constant
    • It doubles
    • It rises

  16. If nominal wages rise by 3% while CPI inflation is 4%, what happens to real wages?

    • Rise by 7%
    • Fall by 1%
    • Fall by 7%
    • Rise by 1%

  17. What index is calculated by dividing nominal GDP by real GDP and multiplying by 100?

    • Producer Price Index
    • Consumer Prices Index
    • Retail Prices Index
    • GDP deflator

  18. If the base year index is 100 and current year index is 110, what is the price level change?

    • 10% decrease
    • 1% increase
    • 110% increase
    • 10% increase

  19. Which phenomenon describes high inflation occurring alongside high unemployment and stagnant economic growth?

    • Stagflation
    • Hyperinflation
    • Deflationary spiral
    • Reflation

  20. Why might CPI overestimate the true cost of living increases for individual consumers?

    • Omitting services
    • Substitution bias
    • Sampling error
    • Underweighting food

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