What is inflation?
A) A decrease in the general price level of goods and services
B) A sustained increase in the general price level of goods and services
C) A stable price level of goods and services
D) A rapid decrease in currency value
Which of the following is commonly used by central banks to control inflation?
A) Reducing interest rates
B) Printing more money
C) Increasing government spending
D) Raising interest rates
What happens when interest rates increase?
A) Borrowing becomes cheaper
B) Borrowing becomes more expensive
C) Savings decrease
D) Inflation accelerates
Which economic policy is used by governments to influence inflation and interest rates?
A) Fiscal policy
B) Monetary policy
C) Trade policy
D) Environmental policy
How does an increase in interest rates generally affect inflation?
A) It reduces inflation
B) It increases inflation
C) It has no effect on inflation
D) It stabilizes inflation at a high level
Which of the following is a primary goal of monetary policy?
A) To reduce government spending
B) To control inflation and stabilize the currency
C) To increase taxes
D) To regulate trade agreements
What is the main effect of high inflation on an economy?
A) Increased purchasing power
B) Reduced purchasing power
C) Stable currency value
D) Economic growth
Which of the following is NOT a tool used by central banks to influence interest rates?
A) Open market operations
B) Reserve requirements
C) Tax rates
D) Discount rate
What is deflation?
A) A rise in the general price level of goods and services
B) A decline in the general price level of goods and services
C) A stable price level for goods and services
D) A rapid increase in currency value
Which of the following is an effect of inflation on savings?
A) It increases the real value of savings
B) It decreases the real value of savings
C) It has no impact on savings
D) It leads to higher interest rates for savers
What is the primary purpose of the interest rate set by central banks?
A) To promote international trade
B) To control inflation and stimulate economic activity
C) To control tax rates
D) To regulate government spending
Which of the following is most likely to occur during a period of low interest rates?
A) Decreased borrowing and investment
B) Increased borrowing and investment
C) Reduced consumer spending
D) Increased unemployment
Which factor primarily affects the supply of money in an economy?
A) Government spending
B) Central bank policies
C) The unemployment rate
D) Tax rates
What is the relationship between inflation and the purchasing power of money?
A) As inflation increases, purchasing power increases
B) As inflation increases, purchasing power decreases
C) Inflation has no effect on purchasing power
D) Inflation increases the value of money
What is a key characteristic of hyperinflation?
A) A sharp decrease in prices over a short period
B) A sustained and uncontrollable rise in prices
C) Stable prices with slow growth
D) A dramatic reduction in the money supply
Which of the following economic tools is used to influence the level of inflation?
A) Taxation policy
B) Exchange rate policy
C) Interest rate adjustments
D) Export control measures
Which of the following factors is most likely to cause inflation?
A) A decrease in government spending
B) An increase in the supply of money
C) A rise in interest rates
D) A fall in demand for goods and services
Which economic indicator is most commonly used to measure inflation?
A) Consumer Price Index (CPI)
B) Gross Domestic Product (GDP)
C) Unemployment rate
D) Exchange rates
Which of the following can be a result of high interest rates in an economy?
A) Increased consumer borrowing
B) Decreased investment in business
C) Increased inflation
D) Stable currency value
Which of the following is a consequence of a low inflation rate in an economy?
A) Decreased demand for goods and services
B) Increased stability and predictability in the economy
C) Decreased consumer confidence
D) Increased uncertainty in the job market
What is the role of fiscal policy in managing inflation?
A) Adjusting the supply of money in the economy
B) Regulating interest rates
C) Controlling government spending and taxation
D) Setting inflation targets
Which of the following is true about the effect of high inflation on lenders?
A) It increases the real value of loans
B) It decreases the real value of loans
C) It has no effect on loans
D) It increases the interest rates on loans
What happens when inflation expectations rise in an economy?
A) Prices of goods and services tend to fall
B) Central banks decrease interest rates
C) Consumers and businesses may increase prices in anticipation
D) The money supply shrinks
How does a decrease in interest rates usually affect the economy?
A) It encourages borrowing and spending
B) It discourages borrowing and spending
C) It reduces inflation
D) It decreases investment in the economy
Which of the following describes the role of central banks in economic policies?
A) Central banks set government tax rates
B) Central banks manage the money supply and interest rates
C) Central banks regulate trade policies
D) Central banks collect tax revenue
What is the purpose of a central bank’s open market operations?
A) To regulate foreign exchange rates
B) To control the amount of money circulating in the economy
C) To monitor employment levels
D) To set tariffs on imports
What is the effect of a decrease in inflation on an economy?
A) It leads to increased consumer spending
B) It results in higher wages
C) It increases the cost of borrowing
D) It encourages saving and investment
Which policy is typically used by governments to reduce inflation in an economy?
A) Increasing government spending
B) Reducing taxes
C) Tightening monetary policy by increasing interest rates
D) Printing more money
What is the relationship between inflation and wage growth?
A) Inflation generally causes wages to grow faster
B) Inflation reduces wage growth in real terms
C) Inflation has no impact on wage growth
D) Inflation causes wages to stagnate
