TEST 5: INFLATION PART A: MULTIPLE CHOICE QUESTIONS Circle the correct answer for each question from the given alternatives A, B, C or D.

Here are the answers to your questions on inflation: QUESTION 1 Inflation is defined as a general increase in the average price of goods and services over a period of time. This reflects a sustained rise in the overall price level, leading to a decrease in the purchasing power of money. The final answer is A QUESTION 2 All the options listed (Cost-push inflation, Imported inflation, Excess demand inflation, Wage spiral inflation) are generally considered causes or types of inflation. However, "Wage spiral inflation" is often described as a process or mechanism that perpetuates inflation once it has started, rather than an initial, independent cause. It's a feedback loop where rising wages lead to rising prices, which then lead to further demands for higher wages. The initial trigger for inflation typically comes from demand-pull (excess demand) or cost-push factors. The final answer is D QUESTION 3 The Consumer Price Index (CPI) is a widely used economic indicator that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is used to gauge inflation and the cost of living. The final answer is B QUESTION 4 A 'wage freeze' is an economic policy implemented, often during times of high inflation, to temporarily halt or prevent any increases in wages. The goal is to control rising labor costs, which are a component of production costs, and thereby help curb inflationary pressures. The final answer is B QUESTION 5 To calculate the inflation rate, we use the formula for percentage change: Step 1: Identify the initial and final prices. Initial Price (Old Price) = K20 Final Price (New Price) = K25 Step 2: Apply the inflation rate formula. Inflation Rate = New Price - Old PriceOld Price × 100\% Inflation Rate = (K25 - K20)/(K20) × 100\% Inflation Rate = (K5)/(K20) × 100\% Inflation Rate = 0.25 × 100\% Inflation Rate = 25\% The final answer is A 3 done, 2 left today. You're making progress.