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As macroeconomics MCQS

Inflation

1.What always happens when there is an increase in the Consumer Price Index?
A an increase in consumer expenditure
B an increase in the cost of living
C a reduction in living standards
D a reduction in real disposable income O/N19/11/26

2 The table shows the annual percentage increases in a country’s consumer prices
index (CPI).

2.Which statement is correct?

A Consumer prices, on average, fell throughout the period.
B Consumer prices, on average, remained the same in 2016 and 2017.
C The general level of consumer prices was at its highest in 2015.
D The general level of consumer prices was at its highest in 2018. O/N19/12/22

3 The graph shows the rate of inflation for seven countries for 2015 and 2016.

What can be concluded from this graph?

A Prices in Costa Rica rose in 2015 but remained constant in 2016.
B Prices in Ecuador and Mauritius were lower in 2016 than in 2015.
C Prices in India and Malaysia remained constant in 2016 and 2015.
D Prices in Thailand and Japan were lower in 2016 than in 2015. O/N19/13/21
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4 What must be true if an economy is experiencing inflation?

A Aggregate demand is increasing.
B Aggregate supply is decreasing.
C The interest rate is increasing.
D The real value of money is decreasing. O/N19/13/25

5 The diagram shows aggregate supply and aggregate demand curves for an
economy.

What would cause a movement from X to Y?

A a decrease in income tax and in the cost of production
B a decrease in interest rates and increase in the cost of production
C an increase in income tax and in the cost of production
D an increase in interest rates and decrease in the cost of production M/J19/11/24

6 The table shows changes in the population, price level and Gross Domestic Product
(GDP) of a country.

What happened to real GDP and real GDP per head between year 1 and year 2?

M/J19/11/25
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7 An economy is experiencing a period of deflation.

What must be happening?
A The average price level is falling.
B The output of the economy is falling.
C The rate of inflation is falling.
D The real value of money is falling. M/J19/12/25

8 The diagram illustrates what happens to aggregate demand (AD) and aggregate
supply (AS) in an economy during a year.

What explains the rise in the general price level?

A boom in consumer spending
B higher taxes on company profits
C reduction in government-financed projects
D rising costs of raw materials M/J19/13/18

9 How is a rate of inflation that is lower than that expected likely to affect lenders and
borrowers in an economy?

M/J19/13/19
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10 What is likely to be the least effective store of value during a period of rapid
inflation?
A antique furniture
B fixed interest government securities
C houses
D shares of industrial companies M/J19/13/26

11 The diagram shows aggregate demand (AD) and aggregate supply (AS) in an
economy. Thi initial equilibrium is at point E.

What causes shifts in the aggregate supply curve from AS to AS1 and from AS to
AS2?

F/M19/12/27
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12 The diagram shows the change in an economy’s rate of inflation over 4 years.

What happened to the general price level over the 4 years?

O/N18/11/21

13 The table shows the consumer price index (CPI) and national output at current
prices in 2014 and 2015 for an economy.

What can be concluded when 2015 is compared with 2014?

A Money national output decreased by 10%.
B Money national output increased by 20%.
C Real national output fell.
D Real national output increased. O/N18/12/20

14 A country experiences a fall in the consumer price index.

What must be associated with such a fall?
A a decrease in average wage rates
B a decrease in borrowing
C a decrease in consumers’ expenditure
D a decrease in the cost of living O/N18/13/21
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15 What would be certain to cause a fall in a country’s cost of living?

A a fall in real incomes
B a fall in the inflation rate
C a negative inflation rate
D a reduction in direct tax rates M/J18/11/20

16 The table gives figures for household spending in the UK economy between 2008
and 2010.

What can be concluded from the figures?

A All households bought more goods and services in 2010 than in 2008.
B Households saved more in 2008 than in 2010.
C Living standards were lower in 2009 than 2010.
D The rate of inflation was higher in 2010 than in 2009. M/J18/11/21

17 The diagrams show the inflation rate over time in four countries.
Which country experiences a falling cost of living throughout the period?

M/J18/12/20

18 A government statistical office measured changes in income from employment,

pensions and benefits, then subtracted income tax and welfare contributions and
adjusted for inflation.
What did the final figure represent?
A changes in nominal income
B changes in nominal net earnings
C changes in real disposable income
D changes in real gross earnings M/J18/12/21
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19 The average consumer divides his expenditure between food, clothing,

accommodation and transport in the ratio 2 : 1 : 4 : 3.
During the course of a year, the price of food falls by 2%, the price of clothing
increases by 4%,
the price of accommodation increases by 10% and the price of transport remains
constant.
Assuming that the weights of a price index reflect the expenditure of the average
consumer, what
is the increase in the index over the year?
A 2.5% B 4% C 10% D 12% M/J18/13/20

20 In June 2016 the UK voted to leave the European Union. The table shows what
happened to the value of the pound sterling before and after the vote.

The UK is a major trading nation.

What is likely to be the short-term impact of the changes in the value of the pound
sterling on the UK economy?
A increased disinflation
B increase in cost-push inflation
C more purchasing power of money
D reduced demand-pull inflation M/J18/13/22

21 The table shows the CPI rate of inflation (%) in the United States from 2006 to 2013.

What can be concluded from the figures about the period 2006 to 2013?
A There was one year of constant prices.
B There were three years of deflation.
C There were only four years of inflation.
D There were eight years of rising living costs. F/M18/12/22

22 The table shows a country’s consumer price index for March and April 2015.

Which statement correctly describes what happened between these two months?
A There was a decrease in the annual rate of inflation.
B There was a decrease in real interest rates.
C There was an increase in the purchasing power of money.
D There was an increase in the standard of living. O/N17/11/20
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As macroeconomics MCQS

23 What would be likely to increase inflation in an economy?

A an increase in consumer saving
B an increase in interest rates
C an increase in labour productivity
D an increase in taxes on imports O/N17/11/21

24 The table shows the retail prices index for four countries for years 2 and 3.
(Year 1 index = 100 for all countries.)
Which country had a higher rate of inflation in year 2 than year 3?

O/N17/12/20

25 What would be likely to decrease inflation in an economy?

A a decrease in consumer saving
B a decrease in unemployment
C an increase in labour productivity
D an increase in taxes on imports O/N17/13/20

26 What is the average weighted price change illustrated by the table below?

A –1.8% B 4.5% C 7.2% D 9.0% O/N17/13/21

27. A government succeeds in changing a current account deficit into a current

account surplus.
Why might this current account surplus increase the country’s inflation rate?
A It raises aggregate demand.
B It raises production costs.
C It reduces the exchange rate.
D It reduces the money supply. M/J17/11/21

28 Which statement about changing price levels is correct? M/J17/12/20

A Anyone on a fixed income has rising real income during deflation.
B Government revenue from indirect taxes falls during inflation.
C Producers prefer deflation to inflation.
D Savers prefer index-linked savings when there is deflation rather than inflation.
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As macroeconomics MCQS

29. Which combination of events is most likely to cause inflation?

M/J17/12/21

30. The table shows the year-on-year percentage changes for a country’s consumer
price index from 2009 to 2015.

Which statement about the price level is correct?

A It fell over the first half of the period.
B It was at its highest at the start of the period.
C It was at its lowest at the end of the period.
D It was at its lowest at the start of the period. M/J17/13/21

31 Relative weights are used in calculating the index of retail prices to reflect the
different

A amounts of money spent by consumers on each good.

B levels of prices for each good.
C numbers of people buying each good.
D rates of change in price of each good over time. F/M17/21
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32 The diagram shows the possible relationships between the degree of

independence of the central bank and the level of inflation.

Which relationship suggests that central bank independence is an effective way to

reduce inflation?