2.3 Inflation

    Cards (28)

    • What is inflation expressed as?
      Percentage change
    • Inflation is typically measured using Price Indices
    • The CPI reflects consumer price changes, while the PPI tracks producer price changes.

      True
    • How does inflation reflect changes in the price level?
      Percentage change
    • The CPI and PPI provide insights into the overall rate of inflation
    • Demand-pull inflation occurs when aggregate demand exceeds aggregate supply.

      True
    • Match the type of inflation with its definition:
      Demand-Pull Inflation ↔️ Aggregate demand exceeds aggregate supply
      Cost-Push Inflation ↔️ Production costs increase
    • What is one factor that can cause cost-push inflation?
      Higher raw material costs
    • Inflation is expressed as a percentage change in the price level
    • Steps to measure inflation using price indices:
      1️⃣ Track changes in prices of goods and services
      2️⃣ Use the CPI to measure consumer price changes
      3️⃣ Use the PPI to measure producer price changes
      4️⃣ Calculate the percentage change in prices
    • What does inflation measure in an economy?
      Increase in prices
    • Inflation is measured using Price Indices
    • What does the CPI measure?
      Consumer price changes
    • The CPI tracks price changes from the perspective of consumers
    • Both the CPI and PPI provide insights into the overall rate of inflation in the economy.

      True
    • What are the two main types of inflation?
      Demand-pull and cost-push
    • Demand-pull inflation occurs when aggregate demand exceeds aggregate supply
    • What is a common cause of cost-push inflation?
      Higher raw material costs
    • Expansionary monetary policy can contribute to demand-pull inflation.

      True
    • Inflation is primarily caused by demand-pull and cost-push factors
    • Inflation reduces the purchasing power of money.
      True
    • Inflation can discourage investment
    • Monetary policy is effective at curbing high inflation but can slow economic growth.
      True
    • What is a potential drawback of fiscal policy in managing inflation?
      Slow implementation
    • Rising energy prices are a factor that can cause cost-push inflation
    • How does inflation affect debtors?
      Eases debt burden
    • What is the role of monetary policy in managing inflation?
      Raises interest rates
    • Direct controls such as price ceilings may distort market prices
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