Vocab

Question 1

What is inflation?

Answer 1

the rate of increase in prices over a given period of time.

Question 2

What is CPI

Answer 2

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Question 3

Hyperinflation

Answer 3

Hyperinflation is a term used when inflation rates exceed 50%.

Question 4

Deflation

Answer 4

Deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency.

Question 5

What is M1?

Answer 5

M1 is the money supply that is composed of currency, demand deposits, other liquid deposits

Question 6

What is M2?

Answer 6

Image result for what is m2 in economics
A broader definition of money, M2 includes everything in M1 but also adds other types of deposits. For example, M2 includes savings deposits in banks.

Question 7

How does money supply effect inflation?

Answer 7

if the money supply grows at a faster rate than the economy’s ability to produce goods and services, then inflation will result.

Question 8

Equation for in flation

Answer 8

(B-A)/A*100