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b) low inflation;
c) hyperinflation;
d) deflation.

4 When inflation is at a million or trillion percent per year, we call that:
a) hyperinflation;
b) galloping inflation;
c) low inflation;
d) deflation.

5 Demand-pull inflation occurs when:
a) aggregate demand rises more rapidly than the economy's productive
potential;
b) imports exceed exports;
c) both a and b;
d) neither a nor b.

Answer the following questions.
1 How is fiat money defined? How is commodity money defined?
2 What are the functions of money?
3 Explain the equation of exchange.
4 What is the definition of inflation? What is the definition of deflation?
5 What types of inflation do you know?
6 Give the example of a country that experienced hyperinflation.
7 How is Consumer Price Index calculated?

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