Chapter 31: Inflation and deflation Flashcards
Deflation
A sustained fall in the prices of goods and services
Disinflation
A fall in the rate of inflation
Consumer price index (CPI)
A measure of the weighted average of the prices of a representative basket of goods and services
Cost-push inflation
Rises in the price level caused by higher costs of production
Demand-pull inflation
Rises in the price level caused by excess demand
Wage-price spiral
Wage rises leading to higher prices which, in turn, lead to further wage claims and price rises
Monetary inflation
Rises in the price level caused by an excessive growth of the money supply
Monetarists
A group of economists who think that inflation is caused by the money supply growing more rapidly than output
Hyperinflation
A very rapid and large rise in the price level
Index-linking
Changing payments in line with changes in the inflation rate
Menu costs
Costs involved in having to change prices as a result of inflation
Shoe-leather costs
Costs involved in moving money around to gain high interest rates
