Inflation

Question 1

Define Inflation

Answer 1

a general, continued rise in prices

Question 2

Measuring Inflation

Answer 2

Consumer Price Index (CPI)
average prices calculated from the same price information

Question 3

Types of Inflation (1)

Answer 3

Demand-Pull Inflation
rapid rise in demand leading to an increase in prices

Question 4

Types of Inflation (2)

Answer 4

Cost-push Inflation
rise in production cost that causes a rise in prices of goods

Question 5

Solving Inflation with Monetary Policy

Answer 5

Rise in interest rates will bring down inflation

Question 6

Impact of Inflation Prices

Answer 6

lowers purchasing power of the currency

Question 7

Impact of Inflation Wages

Answer 7

workers will negotiate higher wages to make up for inflation
firms have higher costs

Question 8

Impact of Inflation Exports

Answer 8

difficult to sell overseas as goods are more expensive

Question 9

Impact of Inflation Unemployment

Answer 9

higher employment levels to produce more goods

Question 10

Impact of Inflation Menu Cost

Answer 10

costs for firms to make repeated price changes

Question 11

Impact of Inflation Shoe Leather Costs

Answer 11

walk around to search for the lowest prices or the best value

Question 12

Uncertainty

Answer 12

loss of business and consumer confidence
less investment
less growth

Question 13

Impact of Inflation Investment