inflation definitions Flashcards
demand pull inflation
inflation caused by excessively high levels of aggregate demand beyond that needed to generate full employment
cost push inflation
inflation that occurs due to rises in the cost of procuction incurred by firms
wage cost inflation
import cost inflation
emerging market inflation
disinflation
where the rate of inflation falls but it is still positive?
monetarists
Economists who argue that a prior increase in the money supply is the cause of inflation
quantity of money theory
an alternative explanation for inflation which states that the only cause of inflation is excessive growth in the money supply
equation of exchange
deflation
a fall in the average level of prices over time
velocity of circulation
the rate at which money circulates round the economy, e.g., how many times the same banknote is used over a period of time
menu costs
the costs associated with updating for changes in prices over time
search costs
the costs associated with researching information needed for economic transactions e.g., who offers the lowest price
shoe leather costs
the costs in time and money made in making price comparisons
fiscal drag
taxpayers pulled into a higher tax band despite incomes not rising in real terms
benign deflation
a fall in the price level due to increases in aggregate supply, usually due to falling costs of production
malevolent delflation
a fall in the price level due to a fall in aggregate demand
wage rigidity
the situation where wages are stick and do not fall in line with falling prices
commodity
a homogenous product ( all output of the product is identical ) that is often used as a basic input into production. common examples are oil, copper, minerals =, cotton and basic food stuffs ( wheat and cocoa )
open economy
an economy in which foreign trade accounts for a significant proportion of GDP
