econ fed test inflation

Question 1

Define Inflation

Answer 1

rising of the general level of prices of goods and services also reduces the “purchasing power” of money

Question 2

How is inflation measured*****

Answer 2

consumer price index (CPI) because it measures the change in prices for a basket of consumer goods and prices

Question 3

What is the Market Basket

Answer 3

fixed list of goods and services that can be used to measure inflation and any changes in the cost of living

Question 4

What is inflation rate

Answer 4

% change in prices in 1 year

Question 5

Inflation good or bad?

Answer 5

overall bad but can be good for some

Question 6

who is hurt by inflation

Answer 6

Lenders
People with fixed incomes
Savers

Question 7

who is helped by inflation

Answer 7

Borrowers
A business where the price of the product increases faster than the price of resources

Question 8

what Consumer Price Index (CPI) is**

Answer 8

it measures the change in prices for a basket of consumer goods and prices by The base year is given an index of 100 and multiplied
To compare, each year is given an index # as well

Question 9

Three Problems with CPI***** def of each

Answer 9

Substitution Bias
New Products
Product Quality

Question 10

Three causes of inflation*****def of each

Answer 10

The Government Prints TOO MUCH Money
DEMAND-PULL INFLATION
COST-PUSH INFLATION

Question 11

Wage-Price Spiral*****

Answer 11

1.Workers demand raises
2.Owners increase prices to pay for raises
3. High prices cause workers to demand higher raises