Jezri Mohideen - Finance - Do you Understand Inflation? Take the Inflation Quiz and put your knowledge to the test. For more information visit http://www.jezrimohideen.co.uk/jezri-mohideen-looks-at-the-commonly-accepted-causes-of-inflation/

1. Do you Understand Inflation?
Take the Inflation Quiz
Put your knowledge to the test.
1. A price that has been corrected for inflation is referred to as
the
A. stated price
B. nominal price
C. real price

2. 2. When people mistake changes in nominal prices for changes
in real prices, economists call this
A. money illusion
B. monetary inefficiency
C. money neutrality
3. Inflation could co-exist with all of the
following except
A. Rising real wages
B. An increase in the value of money
C. Falling unemployment
4. What relationship exists between nominal interest rates
and inflation rates?
A. Nominal interest rates tend to decrease with inflation rates.
B. Nominal interest rates are not correlated with inflation rates.
C. Nominal interest rates tend to increase with inflation rates.

3. 5. Which of the following countries had the highest average
annual inflation rate between 2002 and 2007?
A. United States
B. Saudi Arabia
C. Hong Kong
6. Which one of the following could lead to an
increase in the underlying rate of inflation?
A. A fall in consumer spending
B. A fall in the government budget deficit
C. A fall in the exchange rate
7. Inflation is defined as
A. The % change in the price level over the preceding 12 months
B. The increase in average prices in the retail sector
C. The percentage expansion of the economy over the last year
8. A rise in the exchange rate of sterling is likely to assist UK
government policies aimed at reducing the
A. Rate of inflation
B. Balance of Payments deficit
C. Level of unemployment

4. 9. During a year, there has been a rise in national income of 8%
and a rise in the retail price index of 5%. The population
remained stable. The approximate change in real income per
head is?
A. +3%
B. +4%
C. -3%
D.+13%
10. Suppose the nominal interest rate is
10%. The rate of inflation is 7%. The real
interest rate is
A. 3%
B. + 3%
C. + 1.7%
D.+ 17%
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Answers:
1. C
2. A
3. B
4. C
5. A
6. C
7. A
8. A
9. A
10. B