05.06 Does Inflation Matter Quiz – Flashcards
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If one U.S. dollar equals one euro, which of these could result if the euro experiences inflation?
answer
U.S. citizens would purchase more goods from the E.U. for less money.-
Inflation is the rise of prices over time. If the euro saw inflation, it would take more euros to purchase a good or service than it cost previously. If the euro sees inflation but the dollar does not, an exchange would favor the U.S. dollar, and the dollar would be able to purchase more goods and services than it was able to purchase when it was equal to the euro.
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If the U.S. dollar is strong, what is the impact on trade between China and the U.S.?
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Imports from China to the U.S. increase.-
If the U.S. dollar is strong relative to Chinese currency, the U.S. dollar will buy more goods from China for less. This will result in greater imports from China to the U.S. market.
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Which of these statements is true?
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Inflation is problematic if unexpected.-
If inflation is unexpected, rising prices may cause panic as individuals experience less purchasing power.
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Which of these would be a result of inflation?
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A company scales back production.-
Inflation is the rise in prices over time. Rising prices mean individuals can afford fewer goods. Over time, companies may reduce production.
question
A history graduate student in the United States gets an $18,000 stipend per year. The U.S. sees significant inflation. How might the student react?
answer
Ask for a cost-of-living increase to her stipend.-
Unless the student makes sure her stipend rises with inflation, her income will buy less as prices rise, making it seem as though her income has decreased.
