E. Explain Inflation, Hyper Inflation, Disinflation, Deflation

Question 1

Inflation

Answer 1

A persistent increase in the Plevel over time. The price of all goods and services rise

Inflation rate: %Inc in Pl , and a business cycle indicator to anticipate changes in central bank monetary policy

*Erodes currency Purch Power
Favors borrowers because principal repaid i worth less.

Question 2

Hyper Inflation

Answer 2

Out of control inflation

Question 3

Disinflation

Answer 3

INflation rate that is decreasing over time but remains greater than 0

Question 4

Deflation

Answer 4

Persistently Decreasing Price Level; deep recession;most consumers expect future prices to continue dropping so they delay purchases

for firms deflation = -Revenue and +Real Fixed Costs