Inflation - Practice Quiz
.
- 1.
![Refer to the graph below. Assume that the economy is initially at equilibrium at point (a). If there is demand-pull inflation in the economy such that AD1 shifts to AD2 , the long-run AS curve will be - ProProfs]( "Refer to the graph below. Assume that the economy is initially at equilibrium at point (a). If there is demand-pull inflation in the economy such that AD1 shifts to AD2 , the long-run AS curve will be")
Refer to the graph below. Assume that the economy is initially at equilibrium at point (a). If there is demand-pull inflation in the economy such that AD1 shifts to AD2 , the long-run AS curve will be- A.
AS2 .
- B.
AS1 .
- C.
Point (c).
- D.
A vertical line at Q1 .
- E.
A vertical line at Q2 .
- 2.Economists generally agree that for sustained inflation to occur, the
- A.
Government must accommodate it by increasing government spending.
- B.
Government must accommodate it by decreasing taxes.
- C.
Federal Reserve must accommodate it by increasing the money supply.
- D.
Federal Reserve must accommodate it by decreasing the money supply.
- E.
Government must accommodate it by decreasing government spending or increasing taxes.
- 3.If the government does not react to cost-push inflation with any policy actions, then there is likely to be
- A.
An increase in RGDP.
- B.
A lower unemployment rate.
- C.
An inflation spiral that could become "hyperinflationary."
- D.
A recession.
- E.
Constant price level.
- 4.If the economy is operating at potential GDP, an increase in the money supply will lead to
- A.
Stagflation.
- B.
Sustained inflation.
- C.
Demand-pull inflation.
- D.
Cost-push inflation.
- E.
Deflation.
- 5.Cost-push inflation is caused by a(n)
- A.
Decrease in government regulation.
- B.
Increase in government spending.
- C.
Decrease in taxes that stimulates new spending.
- D.
Increase in wages that go beyond gains in productivity.
- E.
Increase in investment spending.
- 6.
![Refer to the graph below. Assume that the economy is initially at equilibrium at point (a). If there is demand-pull inflation in the economy such that AD1 shifts to AD2 , then in the long run, the price level will be - ProProfs]( "Refer to the graph below. Assume that the economy is initially at equilibrium at point (a). If there is demand-pull inflation in the economy such that AD1 shifts to AD2 , then in the long run, the price level will be")
Refer to the graph below. Assume that the economy is initially at equilibrium at point (a). If there is demand-pull inflation in the economy such that AD1 shifts to AD2 , then in the long run, the price level will be- A.
P2 and RDGP will be Q3 .
- B.
P3 and RDGP will be Q1 .
- C.
P1 and RGDP will be Q1 .
- D.
P2 and RDGP will be Q2 .
- E.
P3 and RGDP will be Q3 .
.png "Refer to the graph below. Assume that the economy is initially at equilibrium at point (a). If there is demand-pull inflation in the economy such that AD1 shifts to AD2 , then in the long run, the price level will be")
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