Title: QUIZ: Inflation Explained -- Fed Explained Video Series
Course: Kelly's Copy-Export Course > Section: Inflation Explained -- Fed Explained Video Series

Q: One negative aspect of inflation for the average consumer is
- wages and salaries rise.
- interest rates on savings rise.
- the purchasing power of income falls.
- the prices of assets, such as homes, rise.
A: the purchasing power of income falls.

Q: Inflation can best be described as
- an increase in the price of necessities.
- an increase in the purchasing power of the dollar.
- a rise in the average price level of goods and services.
- an increase in the amount of goods and services produced in the economy.
A: a rise in the average price level of goods and services.

Q: The cost of living refers to
- the current price level in the economy.
- changes in the price level from one year to the next.
- increases in wages and salaries based on the inflation rate.
- the amount of money needed to sustain a particular level of living.
A: the amount of money needed to sustain a particular level of living.

Q: The Federal Reserve System keeps price levels stable by
- influencing the money supply.
- supervising and regulating the banking system.
- processing electronic payments for commercial banks.
- recommending changes to taxes and government spending.
A: influencing the money supply.

Q: Which of the following inflationary situations could Federal Reserve monetary policy most directly address?
- The increases in price level are caused by too much money circulating in the economy.
- Corn, a major input in food and energy production, suffers a drought forcing price level upwards.
- Higher wage demands by workers increase production costs and the price level of goods and services.
- Price level rises after sustained increases in the price of oil, a major input into many goods and services in the economy. 
A: The increases in price level are caused by too much money circulating in the economy.

Q: Protecting the purchasing power of the dollar means
- keeping the price level constant at all times.
- ensuring that increases in price level will be gradual and predictable.
- setting maximum prices for necessities so most people will be able to afford them. 
- insuring everyone’s bank deposits through the Federal Deposit Insurance Corporation.
A: ensuring that increases in price level will be gradual and predictable.

Q: Price level can be defined as
- the percent change in prices from one year to another year.
- the average of the current price of everything sold in our economy.
- the market value of goods and services produced in the economy in a given year.
- the annual cost of maintaining a particular standard of living within an economy.
A: the average of the current price of everything sold in our economy.

Q: One major purpose of Federal Reserve monetary policy is to
- decrease the money supply when price level is rising.
- adjust marginal tax rates downward when economic activity slows.
- increase production of necessary goods and services during times of shortage.
- reduce government spending in the economy when price level is rising too fast.  
A: decrease the money supply when price level is rising.

Q: With which of the following statements would most economists agree?
- Any increase in the inflation rate is bad for the economy. 
- Increases in prices are always due to inflation in the economy.
- Gradual, predictable increases in the price level promotes economic stability.
- Increases in the inflation rate are fine as long as they are equal to increases in the GDP growth rate.
A: Gradual, predictable increases in the price level promotes economic stability.

Q: An increase in prices is always due to inflation.
- True
- False
A: False