27.objective.

Question 1 Demand-pull inflation may be caused by: a) An increase in costs b) A reduction in interest rate c) A reduction in government spending d) An outward shift in aggregate supply Question 2 Inflation: a) Reduces the cost of living b) Reduces the standard of living c) Reduces the price of products d) Reduces the purchasing power of a pound Question 3 An increase in injections into the economy may lead to: a) An outward shift of aggregate demand and demand-pull inflation b) An outward shift of aggregate demand and cost push inflation c) An outward shift of aggregate supplyand demand-pull inflation d) An outward shift of aggregate supply and cost push inflation Question 4 An increase in aggregate demand is more likely to lead to demand-pull inflation if: a) Aggregate supply is perfectly elastic b) Aggregate supply is perfectly inelastic c) Aggregate supply is unit elastic d) Aggregate supply is relatively elastic Question 5 An increase in costs will: a) Shift aggregate demand b) Shift aggregate supply c) Reduce the natural rate of unemployment d) Increase the productivity of employees Question 6 The effects of inflation on the price competitiveness of a country's products may be offset by: a) An appreciation of the currency b) A revaluation of the currency c) A depreciation of the currency d) Lower inflation abroad Question 7 Menu costs in relation to inflation refer to: a) Costs of finding better rates of return b) Costs of altering price lists c) Costs of money increasing its value d) Costs of revaluing the currency Question 8 In the short run unemployment may fallbelow the natural rate of unemployment if: a) Nominal wages have risen less than inflation b) Nominal wages have risen at the same rate as inflation c) Nominal wages have risen more thaninflation d) Nominal wages have risen less than unemployment Question 9 According to the Phillips curve unemployment will return to the natural rate when: a) Nominal wages are equal to expected wages b) Real wages are back at equilibrium level c) Nominal wages are growing faster than inflation d) Inflation is higher than the growth ofnominal wages Question 10 The Phillips curve shows the relationship between inflation and what? a) The balance of trade b) The rate of growth in an economy c) The rate of price increases d) Unemployment.