Lesson 4.2.3.3

4.2.3.3 Inflation and deflation Quiz: AQA Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.2.3.3, Inflation and deflation: 20 multiple choice questions for the AQA Economics (7136), Unit 2: The national and international economy, written with Revision Ninja.

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The 20 questions

  1. What term describes a persistent decrease in the general price level of an economy?

    • Deflation
    • Stagflation
    • Hyperinflation
    • Disinflation

  2. What term describes a fall in the rate of inflation while prices are still rising?

    • Deflation
    • Reflation
    • Disinflation
    • Hyperinflation

  3. What type of inflation is caused by aggregate demand growing faster than aggregate supply?

    • Imported inflation
    • Wage-push inflation
    • Cost-push inflation
    • Demand-pull inflation

  4. What type of inflation is caused by rising costs of production shifting SRAS to the left?

    • Monetary inflation
    • Cost-push inflation
    • Demand-deficient inflation
    • Demand-pull inflation

  5. In Fisher's equation of exchange MV = PQ, what does the symbol V represent?

    • Volume of output
    • Value of transactions
    • Velocity of circulation
    • Variation in prices

  6. According to the Quantity Theory of Money, what directly determines the price level in the long run?

    • Exchange rate
    • Interest rates
    • Government spending
    • Money supply

  7. What happens to the real value of savings if the inflation rate exceeds the nominal interest rate?

    • It rises
    • It stays constant
    • It doubles
    • It falls

  8. In the equation MV = PQ, the money supply is 200 billion pounds, V is 4 and real output Q is 400 billion. What is the price level P?

    • 2
    • 800
    • 4
    • 200

  9. If the money supply rises by 10% with velocity and real output constant, prices will:

    • Rise by 5%
    • Remain unchanged
    • Rise by 10%
    • Fall by 10%

  10. If inflation is 5% and nominal wages rise by 3%, real wages will:

    • Fall by 2%
    • Fall by 8%
    • Rise by 2%
    • Rise by 8%

  11. What type of inflation is caused by a sharp rise in global commodity prices?

    • Cost-push inflation
    • Disinflation
    • Demand-pull inflation
    • Hyperinflation

  12. How does a depreciation of the pound affect domestic UK inflation?

    • Causes deflation
    • Decreases inflation
    • Increases inflation
    • Has no effect

  13. What term describes workers bargaining for higher pay based on anticipated price increases?

    • Liquidity preference
    • Demand-pull inflation
    • Real wage unemployment
    • Inflationary expectations

  14. What term describes the cost to firms of changing price lists during inflation?

    • Transaction costs
    • Sunk costs
    • Menu costs
    • Shoe leather costs

  15. Why might consumers delay spending during a period of deflation?

    • Rising import costs
    • Expecting lower prices
    • Higher interest rates
    • Falling real debt

  16. How does deflation affect the real burden of existing debt for borrowers?

    • Has no effect
    • Decreases real burden
    • Increases real burden
    • Eliminates real burden

  17. What term describes a slowing down in the rate of inflation?

    • Hyperinflation
    • Stagflation
    • Deflation
    • Disinflation

  18. In Fisher's equation of exchange MV = PQ, what does Q represent?

    • Velocity of circulation
    • Money supply
    • Price level
    • Real output

  19. Which factor can cause inflation to rise while unemployment remains unchanged?

    • Lower money supply
    • Higher demand
    • Cost-push pressures
    • Cheaper imports

  20. Deflation caused by increases in aggregate supply and productivity is known as:

    • Supply-side deflation
    • Demand-side deflation
    • Cost-push inflation
    • Hyperinflation

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