Inflation and Unemployment: Causes, Consequences, and Government Policies

Question 1

Which of the following is NOT a measure of inflation?

Accepted Answer

Employment Level

Answer

Consumer Price Index (CPI)

Answer

Producer Price Index (PPI)

Answer

GDP Deflator

Question 2

Demand-pull inflation occurs when:

Accepted Answer

Aggregate demand is higher than aggregate supply.

Answer

Aggregate supply is higher than aggregate demand.

Answer

Production costs increase.

Answer

Government spending contracts.

Question 3

Which type of unemployment arises from a mismatch between the skills of the workforce and the demands of the labour market?

Accepted Answer

Structural unemployment

Answer

Frictional unemployment

Answer

Cyclical unemployment

Answer

Seasonal unemployment

Question 4

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Interest rates and inflation

Answer

GDP growth and unemployment

Answer

Fiscal policy and monetary policy

Question 5

What is the primary objective of the Bank of England when setting monetary policy?

Accepted Answer

Maintaining price stability

Answer

Promoting economic growth

Answer

Reducing unemployment

Answer

Balancing the budget

Question 6

How does economic growth affect unemployment, and what role can government policies play?

Accepted Answer

Economic growth can lead to structural unemployment, where workers' skills become outdated due to technological advancements.

Answer

Economic growth always leads to lower unemployment.

Answer

Government policies have no impact on economic growth or unemployment.

Answer

Rapid economic growth always reduces unemployment, making government intervention unnecessary.

Question 7

Which of the following can be a negative consequence of high inflation?

Accepted Answer

Reduced economic growth

Answer

Increased investment

Answer

Stable prices

Answer

Lower unemployment

Question 8

What is the term for the situation where the actual inflation rate is significantly above the expected inflation rate?

Accepted Answer

Inflationary gap

Answer

Hyperinflation

Answer

Stagflation

Answer

Deflation

Question 9

What is the fundamental difference between cost-push and demand-pull inflation?

Accepted Answer

Cost-push inflation originates from the supply side, while demand-pull inflation originates from the demand side.

Answer

Demand-pull inflation originates from the supply side, while cost-push inflation originates from the demand side.

Answer

Both are caused by supply-side factors.

Answer

Both are caused by demand-side factors.

Question 10

What is the primary cause of demand-pull inflation?

Accepted Answer

Increased government spending

Answer

Increased wages

Answer

Increased oil prices

Answer

Decline in productivity

Question 11

What is the primary goal of the UK's monetary policy?

Accepted Answer

Control inflation

Answer

Promote economic growth

Answer

Reduce unemployment

Answer

Maintain exchange rate stability

Question 12

What is the Bank of England's inflation target?

Accepted Answer

2%

Answer

1%

Answer

3%

Answer

4%

Question 13

Which of the following is not a tool used by the government to address unemployment?

Accepted Answer

Minimum wage laws

Answer

Fiscal policy

Answer

Monetary policy

Answer

Supply-side policies

Question 14

What is the Phillips curve?

Accepted Answer

A diagram that shows the relationship between inflation and unemployment.

Answer

A theory that states that inflation and unemployment are inversely related.

Answer

A policy tool used by the government to manage inflation and unemployment.

Answer

A graph that shows the relationship between wages and inflation.

Question 15

What is the primary distinction between demand-pull and cost-push inflation?

Accepted Answer

Demand-pull inflation results from increased aggregate demand, while cost-push inflation stems from a rise in input costs.

Answer

Demand-pull inflation arises from decreased aggregate supply, while cost-push inflation occurs due to increased finished goods prices.

Answer

Demand-pull inflation is transient, whereas cost-push inflation is permanent.

Answer

There is no substantial difference between demand-pull and cost-push inflation.

Question 16

Which primary unemployment categories exist?

Accepted Answer

Frictional, structural, and cyclical unemployment

Answer

Demand-deficient, seasonal, and technological unemployment

Answer

Long-term, short-term, and hidden unemployment

Answer

Voluntary, involuntary, and disguised unemployment

Question 17

Which of the following is a primary advantage of using monetary policy to address inflation?

Accepted Answer

Rapid implementation

Answer

Greater effectiveness than fiscal policy

Answer

Absence of adverse effects

Answer

Public approval

Question 18

How are inflation and unemployment primarily related?

Accepted Answer

The relationship is complex and varies

Answer

Inversely related

Answer

Positively related

Answer

Unrelated

Question 19

Which type of unemployment occurs when workers lose their jobs due to technological advancements?

Accepted Answer

Structural unemployment

Answer

Frictional unemployment

Answer

Cyclical unemployment

Answer

Seasonal unemployment

Question 20

What is the primary goal of the Bank of England's monetary policy?

Accepted Answer

To control inflation and support economic growth

Answer

To reduce unemployment

Answer

To maintain a stable exchange rate

Answer

To increase government spending

Question 21

Which of the following is a likely consequence of high unemployment on the government budget?

Accepted Answer

Higher budget deficit

Answer

Increased tax revenue

Answer

Reduced government spending

Answer

Lower budget deficit

Question 22

What is the purpose of a Phillips curve?

Accepted Answer

To show the relationship between inflation and unemployment

Answer

To predict future economic growth

Answer

To measure the effectiveness of stabilization policies

Answer

To track the cost of living

Question 23

Which of the following is NOT a potential cause of inflation?

Accepted Answer

Technological innovation

Answer

Excessive money supply

Answer

Demand-pull factors

Answer

Cost-push factors

Question 24

Which government institution is responsible for setting interest rates in the United Kingdom?

Accepted Answer

Bank of England

Answer

Treasury

Answer

Office for Budget Responsibility

Answer

Financial Conduct Authority

Question 25

Which of the following is a contractionary demand-side policy aimed at reducing inflation?

Accepted Answer

Raising interest rates

Answer

Increasing government spending

Answer

Cutting taxes

Answer

Expanding the money supply

Question 26

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Economic growth and unemployment

Answer

Inflation and interest rates

Answer

Unemployment and wage growth

Question 27

Imported inflation arises when:

Accepted Answer

Domestic prices increase due to higher import prices

Answer

Export prices rise due to higher global demand

Answer

The value of the domestic currency appreciates

Answer

The central bank prints excessive money

Question 28

The natural rate of unemployment refers to:

Accepted Answer

The lowest level of unemployment that can be achieved without causing inflation

Answer

The highest level of unemployment that can be tolerated without causing recession

Answer

The average level of unemployment over a long period

Answer

Zero unemployment

Question 29

Which of the following is NOT a recognized type of inflation?

Accepted Answer

Deflation

Answer

Demand-pull inflation

Answer

Cost-push inflation

Answer

Hyperinflation

Question 30

What is the term used to describe the level of unemployment that cannot be reduced without causing inflation?

Accepted Answer

The natural rate of unemployment

Answer

The equilibrium rate of unemployment

Answer

The structural rate of unemployment

Answer

The frictional rate of unemployment

Question 31

What is the primary cause of demand-pull inflation?

Accepted Answer

An increase in aggregate demand

Answer

A decrease in aggregate supply

Answer

Increased government spending

Answer

Structural changes in the economy

Question 32

Which of the following is a potential negative consequence of high inflation?

Accepted Answer

Reduced purchasing power

Answer

Increased economic growth

Answer

Lower unemployment rates

Answer

Stable prices

Question 33

What is the fundamental difference between cyclical unemployment and structural unemployment?

Accepted Answer

Cyclical unemployment is caused by changes in economic conditions, while structural unemployment is caused by changes in technology.

Answer

Structural unemployment is caused by changes in economic conditions, while cyclical unemployment is caused by changes in technology.

Answer

Cyclical unemployment is temporary, while structural unemployment is permanent.

Answer

Structural unemployment is temporary, while cyclical unemployment is permanent.

Question 34

What is the primary objective of monetary policy?

Accepted Answer

To manage inflation and economic growth

Answer

To reduce unemployment

Answer

To increase government revenue

Answer

To stabilize the exchange rate

Question 35

What is the primary measure of inflation in the United Kingdom?

Accepted Answer

Consumer Price Index (CPI)

Answer

Retail Price Index (RPI)

Answer

Harmonized Index of Consumer Prices (HICP)

Answer

Gross Domestic Product (GDP) Deflator

Question 36

Which of the following is NOT a type of unemployment?

Accepted Answer

Voluntary unemployment

Answer

Frictional unemployment

Answer

Structural unemployment

Answer

Demand-deficient unemployment

Question 37

What is the primary objective of the Bank of England's monetary policy?

Accepted Answer

Controlling inflation

Answer

Promoting economic growth

Answer

Maintaining a stable exchange rate

Answer

Reducing unemployment

Question 38

Which of these is NOT a direct consequence of inflation?

Accepted Answer

Increased purchasing power

Answer

Reduced economic growth

Answer

Distorted investment decisions

Answer

Reduced value of savings

Question 39

Which type of unemployment is caused by long-term structural changes in the economy?

Accepted Answer

Structural unemployment

Answer

Seasonal unemployment

Answer

Demand-deficient unemployment

Answer

Frictional unemployment

Question 40

What is the primary cause of demand-deficient unemployment?

Accepted Answer

Insufficient aggregate demand

Answer

Structural changes in the economy

Answer

Government policies

Answer

Technological advances

Question 41

Which factor is a primary cause of inflation?

Accepted Answer

Excess demand

Answer

Higher unemployment

Answer

Technological advances

Answer

Reduced government spending

Question 42

Which of these government policies is designed to reduce unemployment?

Accepted Answer

Expansionary fiscal policy

Answer

Contractionary monetary policy

Answer

Expansionary monetary policy

Answer

Contractionary fiscal policy

Question 43

Which of these is NOT a direct cause of demand-pull inflation?

Accepted Answer

Increased productivity

Answer

Increased consumer spending

Answer

Lower interest rates

Answer

Increased government spending

Question 44

What type of unemployment happens when people's skills don't match the jobs available?

Accepted Answer

Structural unemployment

Answer

Frictional unemployment

Answer

Seasonal unemployment

Answer

Cyclical unemployment

Question 45

Which of these is a likely consequence of high inflation?

Accepted Answer

Reduced purchasing power

Answer

Lower interest rates

Answer

Increased employment

Answer

Increased economic growth

Question 46

The Phillips curve shows a possible relationship between:

Accepted Answer

Inflation and unemployment

Answer

Trade balance and exchange rates

Answer

Interest rates and economic growth

Answer

Government spending and taxation

Question 47

A government that raises interest rates is aiming to:

Accepted Answer

Reduce inflation

Answer

Stimulate economic growth

Answer

Increase government spending

Answer

Lower unemployment

Question 48

The Consumer Price Index (CPI) is used to measure:

Accepted Answer

Inflation

Answer

Economic growth

Answer

Unemployment

Answer

Productivity

Question 49

A government that increases its spending is aiming to:

Accepted Answer

Stimulate economic growth

Answer

Reduce inflation

Answer

Lower unemployment

Answer

Increase interest rates

Question 50

Which of the following is considered a 'cost-push' factor that can contribute to inflation?

Accepted Answer

Rising oil prices

Answer

Lower interest rates

Answer

Increased government spending

Answer

Increased consumer confidence

Question 51

The natural rate of unemployment is defined as:

Accepted Answer

The level of unemployment that exists when the economy is operating at its potential output

Answer

The average level of unemployment over the past decade

Answer

The highest level of unemployment ever recorded