Whatever Happened to Penny Candy?

Quiz #5

1. Why do dictatorial governments inflate?

A dictatorship doesn't want to be overthrown through revolution by taxing the

people too much.

2. Why do republican/democratic governments inflate?

Elected officials want to keep taxes down in order to be re-elected.

3. Is the wage/price spiral a cause of inflation or a result of inflation?

Result

4. Large increases in the supply of money are always followed by increases in

wages and prices. (true or false)

True

5. Large decreases in the supply of money are always followed by a fall in

wages and prices. (true or false)

True

Bonus question: Give an example of inflation that was not caused by a

government making or printing more money.

Spaniards looting precious metals from the New World. Gold rushes
(California, Australia, Alaska). Switzerland's “no questions asked” banking
system.