Inflation and Unemployment: Causes, Consequences, and the Phillips Curve

Question 1

Which of the following is NOT a primary cause of inflation in the United States?

Accepted Answer

Increased productivity

Answer

Increase in aggregate demand

Answer

Decline in aggregate supply

Answer

Government spending

Question 2

What type of unemployment occurs when the skills demanded by employers differ from those possessed by workers?

Accepted Answer

Structural unemployment

Answer

Frictional unemployment

Answer

Cyclical unemployment

Answer

Seasonal unemployment

Question 3

What is the primary distinction between short-term and long-term unemployment?

Accepted Answer

Duration of joblessness

Answer

Causes of job loss

Answer

Availability of unemployment benefits

Answer

Required skills for new employment

Question 4

Which of the following is a characteristic of hyperinflation?

Accepted Answer

Rapid increases in price levels

Answer

Low unemployment rates

Answer

Stable exchange rates

Answer

Increased purchasing power

Question 5

How does inflation impact the real value of savings over time?

Accepted Answer

Decreases

Answer

Increases

Answer

No impact

Answer

Varies depending on the type of savings

Question 6

Which of the following is NOT a major contributor to inflation?

Accepted Answer

Advancements in technology, leading to lower production costs

Answer

Increased demand (e.g., higher consumer spending)

Answer

Supply shocks (e.g., natural disasters, production disruptions)

Answer

Government spending beyond its means

Question 7

Which of the following is a direct consequence of persistently high inflation?

Accepted Answer

Reduced purchasing power of money

Answer

Increased investment opportunities

Answer

Higher employment levels

Answer

Lower interest rates

Question 8

Which type of inflation occurs due to rising wages and production costs?

Accepted Answer

Cost-push inflation

Answer

Demand-pull inflation

Answer

Hyperinflation

Answer

Stagflation

Question 9

What is a direct result of inflation?

Accepted Answer

Lower value of savings

Answer

Higher purchasing power

Answer

Lower unemployment

Answer

Better living standards

Question 10

What is the term for a period of sustained high unemployment?

Accepted Answer

Chronic unemployment

Answer

Inflationary gap

Answer

Recessionary gap

Answer

Cyclical unemployment

Question 11

What is the term for a situation where both high inflation and high unemployment coexist?

Accepted Answer

Stagflation

Answer

Deflation

Answer

Hyperinflation

Answer

Monetary policy

Question 12

What is the role of the Federal Reserve in managing inflation?

Accepted Answer

To set monetary policy and regulate banks

Answer

To enforce antitrust laws

Answer

To provide financial aid to businesses

Answer

To collect taxes

Question 13

What is the term for government spending designed to stimulate economic growth?

Accepted Answer

Expansionary fiscal policy

Answer

Contractionary fiscal policy

Answer

Keynesian economics

Answer

Monetary policy

Question 14

Which of the following is NOT a factor that contributes to inflation?

Accepted Answer

Sudden increase in supply

Answer

Increased government spending

Answer

Increased demand for goods and services

Answer

Depreciation of the currency

Question 15

Which type of unemployment is caused by technological advancements that render certain jobs obsolete?

Accepted Answer

Structural

Answer

Frictional

Answer

Cyclical

Answer

Seasonal

Question 16

What is the term used to describe a continuous period of economic growth characterized by low unemployment and stable prices?

Accepted Answer

Expansion

Answer

Recession

Answer

Depression

Answer

Stagflation

Question 17

Which of the following is a commonly used measure of inflation?

Accepted Answer

Consumer Price Index

Answer

Dow Jones Industrial Average

Answer

Gross Domestic Product

Answer

Unemployment Rate

Question 18

Which type of unemployment occurs when workers are involuntarily out of work but actively seeking employment?

Accepted Answer

Frictional unemployment

Answer

Structural unemployment

Answer

Cyclical unemployment

Answer

Seasonal unemployment

Question 19

Which of the following is a potential consequence of high inflation?

Accepted Answer

Reduced purchasing power

Answer

Increased economic growth

Answer

Lower unemployment rates

Answer

Stable prices

Question 20

Which of the following is a common tool used by the Federal Reserve to control inflation?

Accepted Answer

Monetary policy

Answer

Fiscal policy

Answer

Trade policy

Answer

Foreign exchange policy

Question 21

Which of the following is a measure of the overall change in prices?

Accepted Answer

Inflation rate

Answer

Unemployment rate

Answer

Gross domestic product

Answer

Balance of trade

Question 22

Which of the following can be a cause of demand-pull inflation?

Accepted Answer

Excessive government spending

Answer

Shortage of skilled labor

Answer

Technological advancements

Answer

Natural disasters

Question 23

Which of the following economic indicators is used to measure the level of unemployment?

Accepted Answer

Unemployment rate

Answer

Inflation rate

Answer

Consumer price index

Answer

Business investment rate

Question 24

How does prolonged high inflation impact the real value of individuals' savings over time?

Accepted Answer

It erodes the purchasing power of savings, reducing their real value.

Answer

It enhances the purchasing power of savings, increasing their real value.

Answer

It leaves the purchasing power of savings unchanged, preserving their real value.

Answer

It raises the nominal value of savings, but their real value remains unaffected.

Question 25

Which of the following is NOT considered a primary type of inflation?

Accepted Answer

Fiscal inflation

Answer

Demand-pull inflation

Answer

Cost-push inflation

Answer

Monetary inflation

Question 26

What is the main factor contributing to demand-pull inflation?

Accepted Answer

A rise in consumer demand

Answer

An increase in the money supply

Answer

Government spending increases

Answer

Increased business investments

Question 27

What economic concept illustrates the relationship between inflation and unemployment?

Accepted Answer

The Phillips Curve

Answer

The Keynesian Cross

Answer

The Laffer Curve

Answer

The Aggregate Supply and Demand Model

Question 28

Which monetary policy tool can be utilized to combat inflation?

Accepted Answer

Raising interest rates

Answer

Purchasing government bonds

Answer

Lowering taxes

Answer

Increasing government spending

Question 29

What is the term for the lowest level of unemployment that can be achieved without triggering inflation?

Accepted Answer

The natural rate of unemployment

Answer

The frictional rate of unemployment

Answer

The structural rate of unemployment

Answer

The cyclical rate of unemployment

Question 30

Which of the following is NOT a potential impact of unemployment on an individual?

Accepted Answer

Improved physical health outcomes

Answer

Increased risk of mental health issues

Answer

Lowered self-esteem

Answer

Increased social isolation

Question 31

What is the primary objective of a nation's monetary policy?

Accepted Answer

To control inflation

Answer

To stimulate economic growth

Answer

To reduce unemployment

Answer

To balance the budget

Question 32

Which type of unemployment is caused by fundamental shifts in the economy, such as technological advancements?

Accepted Answer

Structural unemployment

Answer

Frictional unemployment

Answer

Cyclical unemployment

Answer

Seasonal unemployment

Question 33

The Phillips curve demonstrates an inverse relationship between:

Accepted Answer

Inflation and unemployment

Answer

Inflation and economic growth

Answer

Unemployment and economic growth

Answer

Inflation and interest rates

Question 34

Which government policy primarily aims to reduce unemployment?

Accepted Answer

Fiscal policy

Answer

Monetary policy

Answer

Structural policy

Answer

Trade policy

Question 35

Which of the following factors contributes to frictional unemployment?

Accepted Answer

Insufficient job search skills

Answer

Technological advancements

Answer

Changes in consumer preferences

Answer

Seasonal fluctuations in demand

Question 36

Which monetary policy tool is employed to control inflation?

Accepted Answer

Open market operations

Answer

Fiscal policy

Answer

Taxation

Answer

Wage controls

Question 37

Which type of inflation occurs when prices rise due to increased demand for goods and services?

Accepted Answer

Demand-pull inflation

Answer

Cost-push inflation

Answer

Built-in inflation

Answer

Imported inflation

Question 38

Which of the following is a characteristic of stagflation?

Accepted Answer

High inflation and high unemployment

Answer

High inflation and low unemployment

Answer

Low inflation and high unemployment

Answer

Low inflation and low unemployment

Question 39

The natural rate of unemployment is the lowest possible rate of unemployment that:

Accepted Answer

Can be achieved without causing inflation

Answer

Can be influenced by government policies

Answer

Is independent of economic conditions

Answer

Is always zero

Question 40

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Inflation and economic growth

Answer

Unemployment and government spending

Answer

Economic growth and interest rates

Question 41

Cost-push inflation occurs when:

Accepted Answer

Costs of production increase

Answer

Demand exceeds supply

Answer

Government spending increases

Answer

Wages rise faster than productivity

Question 42

Which of the following policies can the government use to reduce demand-pull inflation?

Accepted Answer

Contractionary monetary policy

Answer

Expansionary fiscal policy

Answer

Contractionary fiscal policy

Answer

Expansionary monetary policy

Question 43

The Phillips curve suggests that reducing inflation may lead to:

Accepted Answer

Increased unemployment

Answer

Increased economic growth

Answer

Reduced government spending

Answer

Lower interest rates

Question 44

What is the primary cause of demand-pull inflation?

Accepted Answer

Increase in consumer demand

Answer

Increase in government spending

Answer

Decrease in supply

Answer

Increase in production costs

Question 45

What does the Phillips curve illustrate?

Accepted Answer

The relationship between inflation and unemployment

Answer

The relationship between supply and demand

Answer

The relationship between interest rates and inflation

Answer

The relationship between government spending and unemployment

Question 46

What is the primary goal of the Federal Reserve's monetary policy?

Accepted Answer

To maintain price stability and maximum employment

Answer

To increase economic growth

Answer

To reduce government debt

Answer

To increase consumer spending

Question 47

What is the natural rate of unemployment?

Accepted Answer

The rate of unemployment when the economy is at full employment

Answer

The lowest possible rate of unemployment

Answer

The highest possible rate of unemployment

Answer

The rate of unemployment when there is no inflation

Question 48

Which of the following is NOT a type of inflation?

Accepted Answer

Structural inflation

Answer

Demand-pull inflation

Answer

Cost-push inflation

Answer

Hyperinflation

Question 49

What is the central idea behind the Phillips curve?

Accepted Answer

There is a relationship between inflation and unemployment, where a decrease in one often leads to an increase in the other.

Answer

Inflation and unemployment are always inversely related.

Answer

Inflation and unemployment do not affect each other.

Answer

High inflation always results in high unemployment.

Question 50

What is the primary objective of the Federal Reserve's policies to control inflation?

Accepted Answer

To maintain stable prices

Answer

To reduce unemployment

Answer

To promote economic growth

Answer

To prevent deflation

Question 51

How does cyclical unemployment differ from structural unemployment?

Accepted Answer

Cyclical unemployment arises during economic downturns, while structural unemployment results from changes in technology or globalization that affect the job market.

Answer

Cyclical unemployment is caused by a shortage of jobs, while structural unemployment is caused by a surplus of workers.

Answer

Cyclical unemployment is temporary, while structural unemployment is permanent.

Answer

There is no difference between cyclical and structural unemployment.

Question 52

How is inflation related to interest rates?

Accepted Answer

High inflation typically results in high interest rates.

Answer

High inflation usually leads to low interest rates.

Answer

Inflation and interest rates are independent factors.

Answer

Inflation and interest rates have no relationship.