Practice Multiple Choice Questions

1. Inflation caused by firms raising prices owing to increased wages, for example, is called:
a. Demand-pull inflation
b. Hyperinflation
c. Deflation
d. Cost-push inflation

2. Which of the following likely to cause demand-pull inflation?

a. Falling consumer spending fuelled by higher taxes
b. Rising costs of imported goods
c. Rapid increase in demand for exports in a country
d. A rise in interest rates

Practice Questions
The global demand for zinc has been rising since the beginning of 2016. One of the main
contributors to the rising demand has been growth in the motorcar industry in China. The rising
demand has resulted in higher prices for zinc. The figure below shows the price of zinc between
2016 and 2017. It has risen from around US$1500 per tonne in January 2016 to US$2600 per tonne
in April 2017.

1. Calculate the percentage increase in the price of zinc between January 2016 and April 2017.
 2. What is meant by demand-pull inflation? Use this case as an example in your explanation.

3. Explain how zinc mining companies might respond to the rising price of zinc in the market.

Other Questions:

4. Describe the difference between the menu costs and the shoe leather costs of inflation.

5. Describe two negative impacts that result as from inflation of the zinc market.