Inflation quiz

More questions about Inflation

These visible examples show the question style. LearnClash turns the full topic into ranked duels and spaced repetition.

1. 1 Easy

   How do real wages change if pay rises 3% and prices 7%?

   Answer: Fall by about 4%

   Why: Dividing 1.03 by 1.07 gives the exact change, a fall of about 3.7%, which the quick subtraction rounds to 4%.

2. 2 Medium

   Which kind of inflation follows a jump in energy prices?

   Answer: Cost-push

   Why: In the 1973 oil crisis, the price of oil roughly quadrupled, raising costs for transport, heating and factories.

3. 3 Hard

   What are the costs to firms of updating their prices called?

   Answer: Menu costs

   Why: Menu costs cause prices to stay sticky since changing catalogs, software, or labels eats up company resources.

4. 4 Easy

   Who gains at lenders' expense when inflation jumps unexpectedly?

   Answer: Borrowers

   Why: Fixed-rate loans are repaid in money that buys less, so their real burden shrinks as prices rise.

5. 5 Medium

   How much do prices rise in total over two years of 10% inflation?

   Answer: 21%

   Why: The second year's 10% lands on prices already up to 110, so it adds 11 points, not 10.

6. 6 Hard

   In the Mundell-Tobin effect, higher inflation causes which change?

   Answer: Lower real interest rates

   Why: Because inflation penalizes holding cash, investors shift funds into physical capital, driving real returns down.