ECS1601 ASSIGNMENT 4 EXPECTED QUESTIONS & SOLUTIONS

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Which one of the following will not be appropriate in an attempt to combat demand-pull
inflation?


a.
An increase in interest rates

b.
An increase in taxes

c.
A decrease in government spending

d.
Measures to decrease the productivity of labour


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In the case of demand-pull inflation, an increase in the general price level is
accompanied by … in total production. In the case of cost-push inflation, an increase in
the general price level is accompanied by…in total production.


a.
a decrease; an increase

b.
a decrease; a decrease

c.
an increase; an increase

d.
an increase; a decrease



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Which one of the following is an example of inflation?


a.
A 4% increase in the tax rate.

b.

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A 4% increase in the interest rate.

c.
A 4% increase in the CPI.

d.
A 4% increase in the petrol price.


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Demand-pull inflation can be combated by …


a.
decreasing personal income tax.

b.
lowering interest rates.

c.
raising interest rates.

d.
increasing government spending.


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Which of the following can cause demand-pull inflation?
[1] A decrease in interest rates which leads to an increase in consumption and
investment spending.
[2] An increase in government spending on social wealth and education.
[3] A rise in the cost of import intermediate goods due to a depreciation of the domestic
currency.


a.
[1] and [2]


b.
[3]


c.

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[1]


d.
[1], [2] and [3]


e.
[2]


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Which of the following best describes a difference between demand-pull inflation and
cost-push inflation?


a.
Demand-pull inflation occurs when there is a shortage in aggregate demand, while cost-
push inflation is the upward pressure on the general price level due to rising cost of
production.

b.
Demand-pull inflation is triggered by increases in the cost of production, while cost-push
inflation occurs when the aggregate demand for goods and services increases while
aggregate supply remains unchanged.

c.
There is no difference between demand-pull inflation and cost-push inflation as they are
triggered by the same sources.

d.
Cost-push inflation can be caused by increases in the cost of wages and
intermediate goods, while demand-pull can be caused by increase in exports.


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Dimpo and Collin will be considered as unemployed if …


a.
they do not have any employment but are actively looking for employment.

b.
they are not actively looking for employment.

c.

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