12 - inflation and deflation Flashcards
deflation
A fall in the general price level
inflation
a sustained increase in the general price level
consumer price index (CPI)
the headline measure of inflation, derived from movements in a weighed basket of consumer goods over a 12 month period
family expenditure survey
a representative monthly survey of UK household expenditure used to derive changes in the CPI
cost push inflation
inflation caused by economic-wide increases in production costs
indirect taxes
taxes levied on spending on goods and services
wage-price spiral
the process whereby increases in costs such as wages, lead to increases in prices which leads to firms costs increasing, and so on
quantity theory of money
the theory that increases in the money supply will increase price level
fisher equation (equation of exchange)
MV=PY
money supply x velocity = price level x real output
velocity of circulation
the number of times the money supple changes hands in a year
hyperinflation
very large, rapid increases in general price level
anticipated inflation
where economic agents correctly predict the future rate of inflation
unanticipated inflation
where economic agents do not accurately predict the future rate of inflation
shoe-leather costs
the time and money spent ‘shopping around’ by consumers to find the bes deals when prices are rising throughout the economy
fiscal drag
increases in the burden of taxation when tax allowances are not increased in line with inflation
