Inflation

Question 1

What is inflation?

Answer 1

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

Question 2

What is the ideal
inflation rate?

Answer 2

target = 2 to 3%

Question 3

Provide your partner with an example of demand pull
inflation.

Answer 3

One example of this is ice cream during summer. As the weather warms, demand for ice cream increases. As a result, the price of ice cream also
increases

Question 4

What is demand pull inflation?

Answer 4

Demand pull inflation is the increase in prices of goods and services due to
the increase in consumer, business, government and foreign spending.

Question 5

What is cost push inflation?

Answer 5

Cost push inflation is the rise in prices of goods due to the increase in the cost
of production.

Question 6

What is Hyperinflation?

Answer 6

Hyperinflation is a term to describe rapid, excessive, and out-of-control general price increases in an economy.

Question 7

What is a major effect of
hyperinflation?

Answer 7

One of the major effects of hyperinflation is that can make currency become worthless.

Question 8

What is Deflation?

Answer 8

Deflation is the decrease in the general level of prices in the economy (the opposite of inflation).