Inflation

Question 1

Inflation

Answer 1

A sustained general increase in prices of goods or services.

Question 2

Deflation

Answer 2

A sustained general decrease in prices of goods or services.

Question 3

Disinflation

Answer 3

A fall in the rate of inflation.

Question 4

Hyperinflation

Answer 4

Very high level of inflation, generally if inflation rates become 50% or higher, it is regarded as Hyperinflation.

Question 5

Consumer Price Index (CPI)

Answer 5

Used to measure the rate of inflation (using the 600 basket of goods)

Question 6

Retail Price Index (RPI)

Answer 6

Used to measure the rate of inflation (using the 600 basket of goods) but unlike CPI, also includes the costs of housing (eg mortgages, council tax)

Question 7

Demand-Pull Inflation

Answer 7

Inflation which is caused by excess demand in the economy. (Demand pulled onto product, increase demand, increases inflation)

Question 8

Cost-Push Inflation

Answer 8

Inflation caused by increase in the costs of production in the economy (cost pushed onto consumers)

Question 9

Indexation

Answer 9

Adjusting the value of economic variables such as wages or the rate of interest in line with inflation.