inflation and deflation quiz 1

Question 1

define inflation

Answer 1

the general increase in the price level.

Question 2

is inflation good or bad?

Answer 2

Inflation IN ECONOMICS is good at LOW & STABLE levels because inflation indicates that people hv money & jobs

HOWEVER; high & unstable Inflation eats away the real value of money and affects the very poor so its also bad.

Question 3

tax will make _____ go up

Answer 3

poverty

Question 4

define HYPER inflation

Answer 4

super high inflation rates

Question 5

the goal of the GOVERNMENT is to keep inflation at ______&____ levels

Answer 5

low and stable (so that ppl can plan &invest)

Question 6

Define deflation (4)

Answer 6

the general decrease in prices

-its very bad because it causes:
businesses to shut down
people get poorer
money loses value
less employment

Question 7

5 causes of inflation

Answer 7

demand pull-inflation
cost push inflation
monetary policy (lower interest rates)
government policies
wage price spiral (trade unions)

Question 8

5 causes of deflation

Answer 8

demand deficiency
supply surplus
debt deflation
monetary policies (rise interest rates)
falling commodity policies

Question 9

3 main goals of MACRO

Answer 9

High GDP
stable & low inflation
low unemployment

Question 10

define stagflation

Answer 10

when OUTPUT slows down or stops or stagnates at the same time prices rise.