Ch.31- Inflation and deflation

Question 1

Deflation

Answer 1

A sustained fall in the prices of goods and services

Question 2

Disinflation

Answer 2

A fall in the rate of inflation

Question 3

Consumer Prices Index (CPI)

Answer 3

A measure of the weighted average of the prices of a representative basket of goods and services

Question 4

Cost-push inflation

Answer 4

Rises in the price level caused by higher costs of production

Question 5

Demand-pull inflation

Answer 5

Rises in the price level caused by excess demand

Question 6

Wage-price spiral

Answer 6

Wages rises leading to higher prices which, in turn, lead to further wage claims and price rises

Question 7

Monetary inflation

Answer 7

Rises in the price level caused by an excessive growth of the money supply

Question 8

Monetarists

Answer 8

A group of economists who think that inflation is caused by the money supply growing more rapidly than output

Question 9

Hyperinflation

Answer 9

A very rapid and large rise in the price level

Question 10

Index-linking

Answer 10

Changing payments in line with changes in the inflation rate

Question 11

Menu costs

Answer 11

Costs involved in having to change prices as a result of inflation

Question 12

Shoe-leather costs

Answer 12

Costs involved in moving money around to gain high interest rates