Cram Cram

Question 1

Demand pull

Answer 1

Increase in AD causes an increase in prices

Question 2

Cost push inflation

Answer 2

Can only see with SRAS

Increased costs reduced supply shifting SRAS to the left

Question 3

Deflationary spiral

Answer 3

Causes a shift of AD left
People would save until prices dropped further
Causing a reduction in AD

Question 4

Causes of deflation

Answer 4

Decrease in AD

Right shift of AS

Question 5

What does Inflation do to the value of money

Answer 5

Decreases the value of money

Question 6

What does deflation do to the value of money?

Answer 6

Increases the value of money

Question 7

Effects of inflation

Pros of inflation

Answer 7

Stops deflation turning into a deflationary spiral
Reduced debt and inequality - value of money decreases reduces real value
Decreases wages - lowers costs for firms and government

Question 8

Effects of inflation

Cons of inflation

Answer 8

Can lead to a wage price spiral

Prices increase so wages increase causing SRAS shift left, increase price more leading to hyperinflation