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inflation productivity MCQs

Practise focused inflation productivity questions with marked answers for exam preparation and subject revision.

inflation productivity Mcqs
1. If there is an increase in the price of apples which causes consumers to purchase fewer kilograms of apples and more kilograms of oranges, the CPI will suffer from ?
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A. bias due to the introduction of new goods.

B. bias due to unmeasured quality change

C. none of these answers

D. substitution bias

E. base year bias

2. The Phillips curve shows the relationship between inflation and what ?
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A. The rate of price increase

B. Unemployment

C. The rate of growth in an economy

D. The balance of trade

3. Menu costs in relation to inflation refers to ?
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A. Costs of money increasing its value

B. Costs of revaluing the currency

C. Costs of altering price lists

D. Costs of finding better rates of return

4. If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is ?
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A. 4 percent

B. 3 percent

C. 10 percent

D. -4 percent

E. 21 percent

5. If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected ?
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A. neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract

B. lenders will gain at the expense of borrowers

C. None of these answers

D. borrowers will gain at the expense of lenders

6. If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected ?
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A. none of these answers

B. firms will gain at the expense of workers.

C. Workers will gain at the expense of firms

D. neither workers nor firms will gain because the increase in wages in fixed in the labor agreement

7. Inflation can be measured by all of the following except the ?
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A. Producer price index

B. finished goods price index

C. GDP deflector

D. consumer price index

E. All of these answers are used to measure inflation.

8. Which of the following would probably cause the CPI to rise more than the GDP deflator in the Pakistan ?
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A. An increase in the price of BMWs produced in Germany and sold in the Pakistan

B. An increase in the price of helicopters purchased by the Pak Navy.

C. An increase in the price of Peugeots produced in the Pakistan

D. An increased in the Price of domestically produced armoured vehicles sold exclusively to Iran

9. If inflation is 8 percent and the real interest rate is 3 percent, then the nominal interest rate must be ?
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A. 5 percent

B. 11 percent

C. 3/8 percent

D. 24 percent

10. Under Which of the following conditions would you prefer to be the borrower ?
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A. The nominal rate of interest is 5 percent and the inflation rate is 1 percent

B. The nominal rate of interest is 15 percent and the inflation rate is 14 percent

C. The nominal rate of interest is 12 percent and the inflation rate is 9 percent

D. The nominal rate of interest is 20 percent and the inflation rate is 25 percent
11. An increase in injections into the economy may lead to ?
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A. An outward shift of aggregate supply and demand-pull inflation

B. An outward shift of aggregate demand- and demand-pull inflation

C. An outward shift of aggregate supply and cost push inflation

D. An outward shift of aggregate demand and cost push inflation

12. In 1989, the CPI was 124.0 in 1990, it was 130.7 What was the rate of inflation over this period ?
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A. 30.7 percent

B. You cant tell without knowing the base year

C. 5.4 percent

D. 5.1 percent

13. Under which of the following conditions would you prefer to be the lender ?
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A. The nominal rate of interest is 15 percent and the inflation rate is 14 percent

B. The nominal rate of interest is 20 percent and the inflation rate is 25 percent

C. The nominal rate of interest is 5 percent and the inflation rate are 1 percent

D. The nominal rate of interest is 12 percent and the inflation rate is 9 percent

14. The effect of inflation on the price competitiveness of a countrys products may be offset by ?
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A. Lower inflation abroad

B. A revaluation of the currency

C. A depreciation of the currency

D. An appreciation of the currency

15. An increase in costs will ?
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A. Reduce the natural rate of unemployment

B. Increase the productivity of employees

C. Shift aggregate supply

D. Shift aggregate demand

16. Suppose your income rises from Rs19,000 to Rs31,000 while the CPI rises from 122 to 169 Your standard of living has likely ?
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A. risen

B. You cant tell without knowing the base year

C. stayed the same

D. fallen

17. The basket on which the CPI is based is composed of ?
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A. total current production

B. Products purchased by the typical consumer

C. consumer production

D. raw materials purchased by firms

E. none of these answers

18. Refer to Figure 24-1 What is the value of the basket in the base year ?
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A. Rs418.75

B. Rs300

C. Rs459.25

D. None of these

19. According to the Phillips curve unemployment will return to the natural rate when ?
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A. Nominal wages are equal to expected wages

B. Nominal wages are growing faster than inflation

C. Real wages are back at equilibrium level

D. Inflation is higher than the growth of nominal wages

20. Inflation ?
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A. Reduce the cost of living

B. Reduce the price of products

C. Reduce the purchasing power of a rupee

D. Reduce the standard of living