INSTITUTO DE ESTUDIOS BANCARIOS GUILLERMO SUBERCASEAUX Fundado en 1929

Quizz: Habitual Actions Simple Present Tense What is Inflation? Read the following text and fill in the gaps with the verbs in brackets.
1Inflation ______ (be) a sustained rise in overall price levels. Moderate 2inflation ______(be) associated with economic growth, while high inflation 3can signal an overheated economy. 4Consumers ______ (spend) more money on goods and services . In the 5growth stage of an economic cycle, demand typically ________ (outstrip) 6the supply of goods, and producers can raise their prices. As a result, the 7rate of inflation _________ (increase). If economic growth ________ 8(accelerate) very rapidly, demand _________ (grow) even faster and 9producers ________ (raise) prices continually. An upward price spiral, 10sometimes called runaway inflation or hyperinflation, can result. 11The inflation syndrome is often described as too many dollars chasing 12too few goods; in other words, as spending _________ (outpace) the 13production of goods and services, the supply of dollars in an economy 14_________ (exceed) the amount needed for financial transactions. The 15result ________ (be) the purchasing power of a dollar ________ (decline). 16In general, when economic growth ________ (begin) to slow, demand 17_______ (ease) and the supply of goods _________ (increase) relative to 18demand. At this point, the rate of inflation usually ________ (drop). Such a 19period of falling inflation is known as disinflation. Disinflation can also 20result from a concerted effort by government and policy makers to 21control inflation. 22When prices actually _________ (fall), deflation has taken root. Often the 23result of prolonged weak demand, deflation can lead to recession and 24even depression. The longest and most severe period of deflation over

1the past century occurred in the 1920s and in the 1930s during the 2Great Depression.