inflation

Question 1

Inflation

Answer 1

A general and ongoing rise in the level
of prices in an entire economy

Question 2

Inflation Rate

Answer 2

The rate of increase in the price level in an entire
economy

Question 3

Price ⇒ Basket of goods and services

Answer 3

A hypothetical group of different items, with
specified quantities of each one meant to represent
a typical set of consumer purchases

Question 4

Consumer Price Index

Answer 4

A measure of the
average change over time in the price paid by a
household for a set of typical goods and services

Question 5

Deflation

Answer 5

Overall decrease in the level of
price

Question 6

Hyperinflation

Answer 6

Extraordinarily rapid increase in
price

Question 7

Substitution bias

Answer 7

Inflation does not account
consumers’ ability to substitute

Question 8

Quality/new goods bias

Answer 8

Inflation does not
account for improvements in the quality of existing goods or the invention of new goods

Question 9

Redistribution of Wealth

Answer 9

Inflation ↑ ⇒ lenders
will receive less in the future

Question 10

Effects on fixed income

Answer 10

Inflation ↑ ⇒ purchasing power of those receiving fixed income ↓

Question 11

Misallocation of resources

Answer 11

Confusion leads to an
inefficiency in consumer spending