Inflation Flashcards
Parts of buisness cycle
Expansion, peak, contraction, trough
expansion
• GDP grows, unempolyment declines
Peak
Real GDP spending is at its highest
Contraction
GDP grouth stows decines
Trough
between contraction and expansion, GDP recovers
a general increase in prices or as a decrease in money’s purchasing power
True or flase
Inflation can be good
a little price increase is good, a big and fast increase is bad
Cause of inflation?
• either created by excessive demand or increase in producer’s per unit cost
Fault of buyers, result of a lot of money in the hands of people
• Demand-pull
→
Causes of demand pull
agregate demand › aggregate supply
- protigate government spending (exersive use of goverment funds)
- investments are high
- lowering of taxes
fault of sellers
Cost puh
Cause of cost push
increase in price of input: producers face a higher operating costs
Effect on producer
when unexpected inflation, prices increase while wages stay thesane
Effect on lenders and savers
i savers
- the money they loaned will be returned not wortin as much
- inflation erodes purchasing pouer of savings t other forms of wealth
Eff3ct on
- as a consumor with fixed income
- during unexpected inflation, fixed income’s see their real income deline
Effect on employees
- some may lose their jobs
• a fixed set of consumer products and services
Representative basket of goods
Price index
to knou how much it will cost to maintain a standard wing life
• represents overall price of goods i services
measures the cost of a representative basket of goods and service bought by a typical firm
PRODUCER PRICE INDEX
measures the cost of a representative basket of goods and service bought by a typical consumer
CONSUMER PRICE INDEX
Headline inflation
intation figure nesulted from using consumer price index
→ things we usually buy
able to work, discouraged about the prospects of finding employment
Hidden
economy is set up to their disadiantage
→ teacher, no school in town
Structural
out of work because of buisness cycle
Cyclical
finds work for only a portion of the year due to seasonal nature ofjoos
→
Sesonal
in between jous, quits
o job starts n mochat ton i for another
Frictional
includes employed and unemployed
LABOR FORCE (LF)
includes employed, unemployed, and out of labor force
ECONOMICALLY ACTIVE POPULATION (EP)
working at a paid job but is willing to work for more hours
UNDEREMPLOYED (UN)
working a paid job for at least some minimum amount of time
EMPLOYED (N)
no job and looking for a job, waiting to start a new job, or on temporary layoff
UNEMPLOYED (U)
