Inflation & Interest Rates | FinTrex

Question 1 of 10

What does inflation describe?

A general rise in prices over time, reducing purchasing power if income does not keep paceA guaranteed fall in every priceOnly stock-market growthOnly wage growth

Question 2 of 10

If prices rise 5% while your cash balance earns 2%, what happens to purchasing power, roughly?

It tends to fallIt must rise 7%It is unchanged by definitionIt doubles

Question 3 of 10

What is a real return?

A return adjusted for inflationA guaranteed returnA return before fees onlyA stock price

Question 4 of 10

Why might central banks raise policy rates?

One possible aim is to restrain demand and inflationary pressureTo guarantee higher stock pricesTo eliminate unemployment instantlyTo set company profits

Question 5 of 10

How can higher policy rates affect borrowers?

New or variable borrowing can become more expensiveAll debts are cancelledHouse prices must riseInterest costs always fall

Question 6 of 10

How can higher rates affect savers?

Some deposit rates may rise, though not always one-for-one or immediatelySavings rates must fallCash stops earning interestInflation becomes zero

Question 7 of 10

Why do inflation measures sometimes differ?

They can use different baskets, populations, housing treatments and formulasOne must be fakeThey all measure stock pricesThey use no data

Question 8 of 10

What is nominal return?

The percentage change before adjusting for inflationThe return after inflation onlyA guaranteed couponA tax rate

Question 9 of 10

Why can inflation data be revised?

Statistical agencies may receive new data or update seasonal and index calculationsInflation is guessed randomlyRevisions guarantee lower inflationPrices stop changing

Question 10 of 10

Does a single inflation reading determine future interest rates with certainty?

No, policymakers consider many indicators and forecastsYesOnly if it is highOnly for mortgages