ECS 1601

Study Unit 9 Quiz

Multiple Choice Questions (MCQs)

1.

2.

3.

Choose one of the following that best defines the consumer price index:
[1]

CPI measure the cost of production, with the cost of a representative basket of goods
but not services

[2]

CPI measure the cost of living, with the cost of a representative basket of goods and
services

[3]

CPI measure the cost of production, with the cost of a representative basket of goods
and services

[4]

CPI measure the cost of living, with the cost of a representative basket of goods but not
services

Choose one of the following that best describes the CPI, core inflation and CPIX
[1]

CPI includes all goods and services, core inflation disregards some goods with highly
volatile price and the CPIX disregards interest on mortgages.

[2]

CPI includes all goods and services, core inflation disregards interest on mortgages and
the CPIX disregards some goods with highly volatile price.

[3]

CPI disregards interest on mortgages, core inflation disregards some goods with highly
volatile price and the CPIX includes all goods and services.

[4]

CPI disregards interest on mortgages, core inflation includes all goods and services and
the CPIX disregards some goods with highly volatile price.

Stagflation is a situation with high unemployment and high inflation. A possible cause of
stagflation is when:
[1]

The AD-curve shifts to the right

[2]

The AD-curve shifts to the left

[3]

The AS-curve shifts to the right

[4]

The AS-curve shifts to the left

Quiz will be discussed on your e-tutor site from Monday 14 April

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ECS 1601
Study Unit 9 Quiz

Long Questions
4.

Write the definition of inflation. What are the four important aspects of this definition?

5.

Use the information in the table below, to answer the questions that follow.
2004

2005

2006

January

121,8

125,4

130,4

February

122,4

125,6

130,5

March

123,2

126,9

131,2

April

123,4

127,6

131,8

May

123,5

127,6

132,6

June

123,9

127,4

133,6

July

124,3

128,5

134,9

August

124,1

129,0

136,0

September

124,1

129,5

136,3

October

124,6

129,6

136,6

November

125,3

129,5

136,5

December

125,0

129,5

137,0

Annual Average

123,8

128,0

134,0
Source: StatsSA, 2006

6.

5.1

What is the inflation rate on a month to month basis for February 2005?

5.2

What is the inflation rate on a month to month basis for September 2006?

5.2

What is the inflation rate on an average annual basis for 2006?

What is the inflation rate if only the following information was given:
2012

2013

GDP at current prices

2 569 875

2 781 069

GDP at constant prices

1 954 876

2 006 942

7.

Name some of the main differences between CPI and PPI.

8.

What type of effects can inflation have on an economy?

9.

Draw the AD-AS framework that shows an increase in inflation with no increase in production.

Quiz will be discussed on your e-tutor site from Monday 14 April

Page 2