In which of the following ways has inflation adversely affected your country’s economy?
Increase in money supply
A fall in real income
Appreciation in the value of money
Increased employment
Correct answer is B
Real income is how much money an individual or entity makes after accounting for inflation. One of the effects of inflation has been a fall in the value of real income. Because the value of money falls during inflation, income earners are affected the most.
Real income measures the power a person has to purchase items based on how that money is affected by, either increasing or decreasing, inflation. If inflation increases more than income, real income will go down. If inflation decreases and income stays the same, then real income goes up.
Expenditure by foreign tourist in a country will be recorded as
Visible exports
Official transfers
Transfer income
Divisible exports
Correct answer is A
No explanation has been provided for this answer.
The best way of combating demand-pull inflation is to
Increase income taxes
Reduce income taxes
Increase import duties
Increase salaries and wages
Correct answer is A
Demand-pull inflation is an inflation caused by excess demand. This happens when demand outweighs supply. To curtail demand pull inflation, governments and central banks would have to implement a tight monetary and fiscal policy. Examples include increasing the interest rate or lowering government spending or raising taxes.
By increasing interest rates, lowering government spending or raising taxes, the government will be taking out the excess money in circulation.
With high interest rates, people would rather save and invest their monies rather than spend it since it attracts high interest. This will take out the excess money in circulation in the economy, reduce people spending power.
Which of the following is not a reason for holding money?
Ostentation
Speculations
Transaction
Precautionary
Correct answer is A
They are three major motives for demanding money; the transactions, the precautionary, and the speculative motives.
The terms of trade is described as unfavourable when
The price of imports rises relative to those of exports
The price of exports rises relative to those of imports
The net income from aabroad does not change
The value of exports exceeds those of imports
Correct answer is A
No explanation has been provided for this answer.