INFLATION Flashcards
1
Q
What is the difference between real and nominal prices?
A
The nominal price of a good is its value in terms of money. The relative or real price is its value after being adjusted for inflation
2
Q
What are the consequences of an increase in CPI?
A
Increase in inflation rate, banks are likely to increase interest rates to reduce borrowing, consumption and investment in the short term to moderate the price level
