Title: QUIZ: Inflation -- Economic Lowdown Video Series
Course: Andria Testing FRE2 > Section: Inflation -- Economic Lowdown Video Series

Q: What does 2 percent annual inflation rate mean?
- There is 2 percent more money in circulation than the year before.
- Wages increase by 2 percent each year.
- On average, a dollar buys 2 percent fewer goods and services than it did the year before.
- On average, a dollar buys 2 percent more goods and services than it did the year before.
A: On average, a dollar buys 2 percent fewer goods and services than it did the year before.

Q: How does the Consumer Price Index (CPI) measure inflation?
- By tracking the price of a different market basket of goods year after year
- By tracking the number of goods and services a certain amount of money can buy year after year
- By tracking the prices paid for all the goods and services sold in an economy over time
- By tracking the prices paid for a market basket of consumer goods and services over time
A: By tracking the prices paid for a market basket of consumer goods and services over time

Q: What does it mean if the CPI rises from 100 to 150 the next year?
- The economy has experienced 5% inflation; average prices are 5% higher.
- The economy has experienced 5% deflation; average prices are 5% lower.
- The economy has experienced 5% inflation; 5% more goods and services are available.
- The economy has experienced 5% deflation; 5% fewer goods and services are available.
A: The economy has experienced 5% inflation; average prices are 5% higher.

Q: At its root, what causes inflation?
- Too little money chasing too many goods
- Too much money chasing too few goods
A: Too much money chasing too few goods

Q: The Federal Reserve’s goal of price stability means that the Fed tries
- to prevent prices from rising.
- to reward companies that do not change their prices.
- to prevent inflation by maintaining an inflation rate of 0%.
- to maintain an inflation rate of about 2%.
A: to maintain an inflation rate of about 2%.

Q: When there is _____ _____, businesses and consumers can spend and invest with confidence. As they spend and invest with confidence, more goods and services are produced and more workers are hired, which moves the economy toward _______ employment.
- price stability; minimum
- price stability; maximum 
- high inflation; maximum
- low inflation; minimum 
A: price stability; maximum 

Q: What is inflation?
- A sustained increase in the average price level of goods and services
- An increase in the prices of important goods and services that people need on a regular basis
- A sustained increase in average wages
- A sustained decrease in the amount of goods and services available
A: A sustained increase in the average price level of goods and services