Inflation and Deflation

Question 1

Deflation

Answer 1

A fall in the general PL over a period of time

Question 2

Inflation

Answer 2

A sustained increase in the PL over a period of time

Question 3

Demand Pull inflation

Answer 3

Occurs when AD > AS leading to a increase in the Price Level

Question 4

Cost Push Inflation

Answer 4

Increase in the Price of the factors of production, specifically, or often, an increase in the price of Raw Materials, or labour leading to increased costs of production which results in firms increasing their price therefore leading to a increase in the general price level

Question 5

Quantity Theory of Money

Answer 5

The theory suggests that an increase in the money supply will lead to an increase in the Price Level.