Inflation And The CPI

1. Apple can't supply the market with enough iPad Minis to meet consumer demand. The result is that the retail price of the Mini continues to increase. This is an example of __________.

System inflation

Hyperinflation

Demand-pull inflation

Cost-push inflation

This scenario is an example of demand-pull inflation. Demand-pull inflation occurs when there is an increase in demand for a product or service that exceeds the supply available. In this case, the high consumer demand for iPad Minis is causing the retail price to increase because Apple is unable to supply enough of them to meet the demand.

Explanation

This scenario is an example of demand-pull inflation. Demand-pull inflation occurs when there is an increase in demand for a product or service that exceeds the supply available. In this case, the high consumer demand for iPad Minis is causing the retail price to increase because Apple is unable to supply enough of them to meet the demand.

2. The cost of steel has risen dramatically, which is making it more expensive to produce automobiles and appliances. Not surprising, GM and GE are just two manufacturers that are passing their increased production costs onto the consumers in the form of higher prices. This is an an example of ___________.

Deflation

Cost-push inflation

Demand-pull inflation

Market forces

The given scenario describes cost-push inflation. This type of inflation occurs when there is an increase in the cost of production inputs, such as steel in this case, leading to higher prices for the final goods and services produced. As the cost of steel rises, manufacturers like GM and GE pass on these increased costs to consumers by raising prices for automobiles and appliances. This results in inflationary pressure caused by the increase in production costs.

Explanation

The given scenario describes cost-push inflation. This type of inflation occurs when there is an increase in the cost of production inputs, such as steel in this case, leading to higher prices for the final goods and services produced. As the cost of steel rises, manufacturers like GM and GE pass on these increased costs to consumers by raising prices for automobiles and appliances. This results in inflationary pressure caused by the increase in production costs.

3. An example of ____________ occurs when the purchasing power of money falls so low that consumers begin to buy gold, diamonds and even tulips.

Destabilization

Hyperinflation

Deflation

Consumer unrest

Hyperinflation refers to a situation where the value of money decreases rapidly, leading to a significant increase in prices. In such cases, consumers may lose confidence in the currency and resort to buying assets like gold, diamonds, and tulips, which are seen as more stable stores of value. This behavior is driven by the desire to protect their wealth from the eroding effects of hyperinflation. The given example perfectly describes the phenomenon of hyperinflation and its impact on consumer behavior.

Explanation

Hyperinflation refers to a situation where the value of money decreases rapidly, leading to a significant increase in prices. In such cases, consumers may lose confidence in the currency and resort to buying assets like gold, diamonds, and tulips, which are seen as more stable stores of value. This behavior is driven by the desire to protect their wealth from the eroding effects of hyperinflation. The given example perfectly describes the phenomenon of hyperinflation and its impact on consumer behavior.

4. Which is not associated with hyperinflation?

War or its aftermath

Rising output in the economy

The hoarding of goods and speculation

A halt to the use of money as both a medium of exchange and a standard of value

Hyperinflation is a rapid and uncontrollable increase in the general price level of goods and services in an economy. It is usually caused by excessive money supply and is often associated with war or its aftermath, hoarding of goods, and a halt to the use of money as both a medium of exchange and a standard of value. However, rising output in the economy is not directly associated with hyperinflation. In fact, increasing output can help stabilize prices and reduce inflationary pressures.

Explanation

Hyperinflation is a rapid and uncontrollable increase in the general price level of goods and services in an economy. It is usually caused by excessive money supply and is often associated with war or its aftermath, hoarding of goods, and a halt to the use of money as both a medium of exchange and a standard of value. However, rising output in the economy is not directly associated with hyperinflation. In fact, increasing output can help stabilize prices and reduce inflationary pressures.

INFLation And The Cpi