Inflation and Unemployment: Types, Causes, and Consequences

Question 1

The Consumer Price Index (CPI) primarily measures changes in prices of goods and services purchased by which sector?

Accepted Answer

Households

Answer

Businesses

Answer

Government agencies

Answer

Exporters

Question 2

Which type of inflation describes a gradual and sustained increase in the overall price level?

Accepted Answer

Creeping inflation

Answer

Hyperinflation

Answer

Galloping inflation

Answer

Demand-pull inflation

Question 3

Which type of unemployment arises when there are insufficient job opportunities to employ all those actively seeking work?

Accepted Answer

Cyclical unemployment

Answer

Frictional unemployment

Answer

Structural unemployment

Answer

Seasonal unemployment

Question 4

Which measure represents the proportion of the labour force that is currently unemployed?

Accepted Answer

Unemployment rate

Answer

Employment rate

Answer

Labour force participation rate

Answer

Economic dependency ratio

Question 5

Which relationship proposes an inverse correlation between inflation and unemployment?

Accepted Answer

Phillips curve

Answer

Phillips wedge

Answer

Laffer curve

Answer

Kuznets curve

Question 6

What is the graphical representation of the relationship between inflation and unemployment known as?

Accepted Answer

Phillips Curve

Answer

Laffer Curve

Answer

Okun's Law

Answer

Phillips-Lipsey model

Question 7

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

Accepted Answer

Reduced purchasing power

Answer

Increased consumer confidence

Answer

Stimulated economic growth

Answer

Lowered unemployment

Question 8

What is the economic situation characterized by both high inflation and high unemployment called?

Accepted Answer

Stagflation

Answer

Recession

Answer

Depression

Answer

Hyperinflation

Question 9

Which government policy tool aims to control inflation by reducing aggregate demand?

Accepted Answer

Monetary policy

Answer

Fiscal policy

Answer

Supply-side policy

Answer

Income policy

Question 10

What is a distinctive feature of structural unemployment?

Accepted Answer

Long-term and persistent

Answer

Temporary and short-lived

Answer

Caused by a lack of job openings

Answer

Easily resolved through government programs

Question 11

Which of the following can potentially cause demand-pull inflation?

Accepted Answer

Increase in government spending

Answer

Decrease in the money supply

Answer

Rise in oil prices

Answer

Technological innovation

Question 12

What is the primary objective of a central bank in managing inflation?

Accepted Answer

Maintain price stability

Answer

Promote economic growth

Answer

Reduce unemployment

Answer

Provide financial stability

Question 13

Discuss the trade-offs associated with using monetary and fiscal policies to address inflation and unemployment.

Accepted Answer

Both monetary and fiscal policies involve trade-offs when used to manage inflation and unemployment.

Answer

Monetary policy can effectively control both inflation and unemployment without trade-offs.

Answer

Fiscal policy is more effective in controlling unemployment than inflation, with no trade-offs.

Answer

Governments should prioritize inflation control, even if it leads to higher unemployment.

Question 14

Which of the following is NOT a type of inflation?

Accepted Answer

Cyclical inflation

Answer

Demand-pull inflation

Answer

Cost-push inflation

Answer

Hyperinflation

Question 15

What is the relationship between the Phillips curve and unemployment?

Accepted Answer

There is a negative correlation between inflation and unemployment.

Answer

There is a positive correlation between inflation and unemployment.

Answer

There is no correlation between inflation and unemployment.

Answer

The relationship varies depending on the economic climate.

Question 16

What is the difference between nominal and real wages?

Accepted Answer

Nominal wages are measured in current prices, while real wages are measured in constant prices.

Answer

Real wages are measured in current prices, while nominal wages are measured in constant prices.

Answer

There is no difference between nominal and real wages.

Answer

Real wages are always higher than nominal wages.

Question 17

Which of the following is NOT a measure of inflation?

Accepted Answer

Gross Domestic Product (GDP)

Answer

Consumer Price Index (CPI)

Answer

Retail Price Index (RPI)

Answer

Producer Price Index (PPI)

Question 18

Which of the following is a potential consequence of high inflation on economic growth and stability?

Accepted Answer

Reduced economic growth

Answer

Increased investment

Answer

Improved economic stability

Answer

Increased consumer confidence

Question 19

Which of the following is NOT a type of inflation?

Accepted Answer

Deflation

Answer

Demand-pull inflation

Answer

Cost-push inflation

Answer

Hyperinflation

Question 20

What is the primary cause of demand-pull inflation?

Accepted Answer

Excess aggregate demand exceeding the economy's production capacity.

Answer

Increase in the cost of production.

Answer

Rising wages.

Answer

Government borrowing.

Question 21

Which of the following is a likely consequence of high unemployment?

Accepted Answer

Reduced economic growth.

Answer

Improved balance of payments.

Answer

Increased investment.

Answer

Higher inflation.

Question 22

What is the name of the relationship between inflation and unemployment?

Accepted Answer

Phillips Curve

Answer

Lorenz Curve

Answer

Laffer Curve

Answer

Keynesian Cross

Question 23

What is the key difference between frictional and structural unemployment?

Accepted Answer

Frictional unemployment is short-term, while structural unemployment is long-term.

Answer

Frictional unemployment is caused by changes in technology, while structural unemployment is caused by changes in the economy.

Answer

Frictional unemployment is voluntary, while structural unemployment is involuntary.

Question 24

Which of the following is NOT a typical benefit of low unemployment?

Accepted Answer

Higher crime rates.

Answer

Reduced poverty.

Answer

Increased consumer spending.

Answer

Improved living standards.

Question 25

What is the primary cause of cost-push inflation?

Accepted Answer

Increase in the cost of production, such as rising wages or raw material prices.

Answer

Government borrowing.

Answer

Wage increases.

Answer

Excess aggregate demand.

Question 26

What is the main purpose of the Consumer Price Index (CPI)?

Accepted Answer

To measure changes in the average price level of a basket of consumer goods and services.

Answer

To set interest rates.

Answer

To control the money supply.