Which of these is linked to the idea of money illusion?

The tendency to think of money in nominal terms

What is the difference in calculating CPI and RPI?

RPI includes some extra housing associated costs

Whihc of these is a good reason to target a little (2%) rather than low inflation?

Low inflation makes negative real interest rates much harder

Which of these is a useful way to control a wage-price spiral problem?

Managing inflationary expectations

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Inflation and Deflation

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Aimed at u6 students studying macroeconomics for A-Level

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Questions 10

Answers

1
Which of these is linked to the idea of money illusion?
Cedit being created by the banks
The BoE pumping extra money into the financial system
The tendency to think of money in nominal terms
Money being undervalued
2
What is the difference in calculating CPI and RPI?
RPI excludes changs in indirect taxation
RPI includes some extra housing associated costs
CPI includes some extra housing associated costs
CPI ecludes fluctuations in key commodity prices
3
What type of inflation is shown here?
Demand-pull
Cost-push
Wage-price spiral
Stagflation
4
Which of these is not a negative implication of a high inflation rate?
It reduces business investment
It shifts AD to the left
Real wages tend to fall
International competitiveness is reduced
5
What type of deflation is present in this diagram?
Disinflationary
Benign
Debt deflation
Malevolent
6
What is the name of the survey to determine the weights of the basket and items within it?
Household spending review
Budget assessment plan
Family expenditure survey
ONS inflation count
7
Another name for a wage-price or a wage-wage spiral is ....
Confidence driven inflation
Second round inflation
Disinflation
Hyperinflation
8
Whihc of these is a good reason to target a little (2%) rather than low inflation?
Low inflation does not risk deflation
Low inflation makes negative real interest rates much harder
People do not suffer from money illusion
Deflation would be ok because it always raises real incomes
9
Which of these is a useful way to control a wage-price spiral problem?
Imposing a maximum wage across all occupations
Boosting AD
Managing inflationary expectations
Engaging in further QE
10
Which of these is the Fisher Equation?
MV=PT
MP=YT
MV=PZ
Bait + hook = caught one

Inflation and Deflation Flashcards | StudBud