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Exercise 4

1. Cost-push inflation is characterised by rising production costs.
   True
   
   
2. An increase in the level of domestic savings is likely to reduce Australia’s inflation rate.
   True
   
   
3. Expectations of rising inflation rates do not add to inflationary pressures in the economy.
   False
   
   
4. High levels of domestic inflation will reallocate resources to speculative areas of the economy, for example real estate.
   True
   
   
5. A large increase in the price paid for imports by domestic producers has little or no impact on the level of inflation.
   False
   
   
6. Demand inflation occurs when the total supply of goods and services is insufficient to meet aggregate demand in the economy.
   True
   
   
7. A deficit budget can generate inflationary pressures in the economy.
   True
   
   
8. Bracket creep occurs when wage earners move into lower tax brackets.
   False
   
   
9. Inflation reduces the real purchasing power of money.
   True
   
   
10. High levels of inflation can reduce Australia’s international competitiveness.
    True

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