Test Your Knowledge Inflation Click on the letter

Question 1 • When the price level rises, the value of money A •

Question 2 • Which of the following is an effect of inflation? A •

Question 3 • How is the inflation rate measured? A • By measuring the

Question 4 • A slowing of the rate of inflation is known as A

Question 5 • The consumer price index (CPI) measures inflation by A • Measuring

Question 6 • How does “core” inflation differ from “headline” inflation? A • Core

Question 7 • Inflation caused by an increase in the cost of producer goods,

Question 8 • The personal consumption expenditures (PCE) price index A • Is the

Question 9 • According to the quantity theory of money, an increase in the

Question 10 • What is the Federal Reserve’s dual mandate? A • To minimize

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Test Your Knowledge Inflation Click on the letter choices to test your understanding A B C

Question 1 • When the price level rises, the value of money A • Increases B • Falls C • Stays the same

Question 2 • Which of the following is an effect of inflation? A • Higher rates of economic growth B • Lower unemployment C • Decreased saving and investment

Question 3 • How is the inflation rate measured? A • By measuring the percentage change in the price level from the previous period B • By measuring changes in the prices of individual goods C • By averaging inflation over time

Question 4 • A slowing of the rate of inflation is known as A • Hyperinflation B • Disinflation C • Deflation

Question 5 • The consumer price index (CPI) measures inflation by A • Measuring the cost of a basket of goods bought by the typical consumer B • Capturing changes in prices for all goods except personal consumption C • Looking at the prices that producers pay for goods and services

Question 6 • How does “core” inflation differ from “headline” inflation? A • Core inflation uses the consumer price index (CPI), while headline inflation is measured using the personal consumption expenditures (PCE) price index B • Core inflation does not include goods bought by consumers C • Core inflation excludes both energy and food costs

Question 7 • Inflation caused by an increase in the cost of producer goods, such as raw materials, is called A • Demand-pull inflation B • Cost-push inflation C • Quantity theory of inflation

Question 8 • The personal consumption expenditures (PCE) price index A • Is the inflation measure followed most closely by the Fed B • Adjusts its basket of goods each month to more accurately measure price changes consumers are facing C • Both of the above

Question 9 • According to the quantity theory of money, an increase in the money supply A • Would increase the price level B • Would decrease the price level C • Would leave the price level unchanged

Question 10 • What is the Federal Reserve’s dual mandate? A • To minimize the price level and maximize economic growth B • To maximize both the price level and economic growth C • Price stability and economic growth

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