Macroeconomics Booklet 3 - p.2-14 Flashcards
What is Inflation?
A sustained increase in the general price level.
What is deflation?
A sustained decrease in the general price level.
What is disinflation?
A fall in the rate of inflation.
What is the difference between disinflation and deflation?
Deflation is a sustained decrease in the GPL whereas disinflation is a fall in the rate of inflation.
What are the 2 measures of unemployment?
1) Claimant count.
2) Labour force survey.
What does economically inactive mean?
Those who aren’t actively seeking work. These include;
1) Retired
2) Prisoners
3) Disabled
Why is labour geographically immobile?
1) Friends and social ties
2) Cultural/religious ties
3) Children in settled schools
4) Differences in housing prices
What is benign deflation?
Beneficial. Caused by falling prices, such as oil, and acts as a boost to real incomes and can promote economic growth.
What is Malign Deflation?
More negative. Caused by a fall in AD, real national output and income fall, economic agents postpone purchases.
What are the benefits of inflation?
1) Relative prices can adjust
2) Firms can overcome the sticky downwards prices
What are the costs of inflation?
1) Psychological costs
2) Menu costs
What are the types of unemployment?
1) Frictional - people in between jobs
2) Seasonal - demand only exists at certain times of the year
3) Structural - change in the structure of the economy
4) Cyclical - caused by a lack of AD
5) Classical - wages being too high for labour markets to clear
