AP Macroeconomics : Inflation Rate
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Example Questions
Example Question #1 : Equilibrium
Deflation, the increase in value of a currency over time, is much rarer than inflation. Although it can seem like a good thing, what is a problem caused by deflation?
It causes the value of debt to increase over time, harming borrowers.
Consumers' purchasing power increases.
Savings are worth more.
Wages decrease faster than prices.
It causes the value of debt to increase over time, harming borrowers.
When money becomes more valuable over time but debts do not change, the money owed on debts will be worth much more than the amount borrowed. This is damaging to borrowers as they must pay back loans that are effectively much more expensive than they agreed to.
Example Question #2 : Inflation Rate
The consumer price index is the key measure that helps to calculate ________.
the unemployment rate
net exports
the inflation rate
the gross domestic product
net imports
the inflation rate
The consumer price index is a government published tool calculated by collecting the prices of various retail items periodically. This snapshot view of current prices is one of the chief measures of inflation, as the inflation rate is simply the measure of the change in the consumer price index.
Example Question #1 : Inflation Rate
Which of the following is not one of the three main causes of inflation?
Cost push inflation
Built-in inflation
Hyperinflation
Demand pull inflation
Hyperinflation
Hyper inflation has to do with the rate of inflation, and is not a cause of inflation. Therefore, hyperinflation is not one of the three main causes of inflation.
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