Definitions Inflation CH31

Question 1

Inflation

Answer 1

The sustained rise in the general price level of goods and services over time. Measured with the Consumer Price Index

Question 2

Hyperinflation

Answer 2

Very high rates of inflation that are out of control, causing average prices in an economy to rise rapidly.

Question 3

Deflation

Answer 3

The sustained fall in the general price level in an economy over time. I.e negative inflation

Question 4

Consumer Price Index

Answer 4

A weighted index of consumer prices in the economy over time. It is used to measure the cost of living for an average household.

Question 5

Base Year

Answer 5

The starting year when calculating an index.

Question 6

Cost-Push Inflation

Answer 6

Cause of inflation, triggered by higher costs of production, thus forcing up prices.

Question 7

Demand-Pull Inflation

Answer 7

Cause of inflation, triggered by higher levels of demand in an economy, thus driving up the general price level.

Question 8

Imported Inflation

Answer 8

Cause of inflation, triggered by higher import prices, forcing up costs of production and thus causing domestic inflation.

Question 9

Wage Price Spiral

Answer 9

When trade unions negotiate higher wages to keep income in line with inflation. However, this causes more inflation as firms increase prices to maintain their profit margins.