Lesson 2.1.2

2.1.2 Inflation Quiz: Pearson Edexcel Economics, Unit 2

20 questions

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Lesson 2.1.2, Inflation: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 2: Theme 2: The UK economy – performance and policies, written with Revision Ninja.

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The 20 questions

  1. What term describes a sustained rise in the general price level over time?

    • Disinflation
    • Inflation
    • Deflation
    • Stagflation

  2. What term describes a sustained fall in the general price level over time?

    • Stagflation
    • Disinflation
    • Deflation
    • Inflation

  3. What is the term for a falling rate of positive inflation?

    • Deflation
    • Hyperinflation
    • Disinflation
    • Stagflation

  4. How are items in the CPI basket weighted when calculating inflation?

    • Household spending share
    • Total government spending
    • Equal percentage weights
    • Producer profit margins

  5. Which cost component is included in the RPI but excluded from the CPI?

    • Food and drink
    • Clothing and footwear
    • Mortgage interest payments
    • Public transport fares

  6. Why might the CPI fail to reflect an individual household's inflation rate?

    • Uses average spending
    • Excludes energy costs
    • Measures export values
    • Ignores service prices

  7. Which scenario directly causes demand-pull inflation in an economy?

    • Excessive aggregate demand
    • Decreased money supply
    • Higher indirect taxes
    • Rising raw-material costs

  8. Which factor is a direct cause of cost-push inflation?

    • Lower interest rates
    • Higher production costs
    • Increased consumer confidence
    • Higher government borrowing

  9. According to the quantity theory of money, inflation is caused by rapid growth in what?

    • Exchange rates
    • Money supply
    • Income tax rates
    • Government debt

  10. Which group is most disadvantaged by an unexpected surge in inflation?

    • Cash savers
    • Fixed-rate borrowers
    • Exporters
    • Property owners

  11. What is a major negative effect of volatile inflation on businesses?

    • Higher profit margins
    • Reduced business investment
    • Increased price stability
    • Lower wage demands

  12. The CPI rises from 110 to 115.5 over a year. What is the annual rate of inflation?

    • 5%
    • 4.5%
    • 10.5%
    • 0.5%

  13. A price index rises from 200 to 210 in year 1 and from 210 to 220 in year 2. What is the inflation rate in year 2, to one decimal place?

    • 9.5%
    • 4.8%
    • 0.5%
    • 10%

  14. Nominal wages rise by 4% while the CPI rises by 6%. Which is the approximate change in real wages?

    • +10%
    • +2%
    • -10%
    • -1.9%

  15. Nominal interest rates are 5% and inflation is 3%. What is the approximate real interest rate?

    • -2%
    • 8%
    • about 2%
    • 15%

  16. What type of inflation occurs when imported raw material prices increase production costs?

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

  17. What type of inflation is triggered by low interest rates during rapid economic growth?

    • Imported inflation
    • Demand-pull inflation
    • Deflation
    • Cost-push inflation

  18. Which bias causes the CPI to potentially overstate rising living costs?

    • Substitution bias
    • Weighting bias
    • Sampling bias
    • Deflation bias

  19. What term describes a fall in inflation rate from 6% to 3%?

    • Reflation
    • Disinflation
    • Stagflation
    • Deflation

  20. High inflation expectations among workers are most likely to trigger what economic phenomenon?

    • Multiplier effect
    • Wage-price spiral
    • Liquidity trap
    • Demand shock

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