Chapter 14- Section 3 Flashcards Preview

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Flashcards in Chapter 14- Section 3 Deck (16):
0

The relative magnitude of prices at one point in time

Price level

1

How is price level used in determining the rate of inflation?

Change in price level divided by beginning price level times 100

2

Inflation between 1%-3%

Creeping inflation

3

Inflation between 100% to 300%

Galloping inflation

4

Inflation that is greater than 500% per year

Hyper inflation

5

In what way does excessive demand cause inflation?

Shortages occur and prices go up

6

What happens when the federal budget has a surplus?

Government collects more taxes than they are spending to help keep inflation down

7

How do labor costs affect inflation?

Dries up the cost of products for manufacturers therefore causing inflation

8

What is the wage price spiral?

Higher prices force workers to ask for higher wages, producers been raise their prices

9

What is excessive monetary growth?

Money supply grows faster than real GDP

10

How does inflation affects the purchasing power of the dollar?

Dollar falls as price rises therefore dollar loses value over time

11

What part of the population is inflation especially hard on?

The people with the fixed income; retirees

12

What happens if people change their spending habits?

It disrupts the economy

13

What happens when businesses adjust their spending habits?

Causes spending on durable goods to fall dramatically

14

What is one cause of inflation?

Excessive demand (demand-pull) caused by consumers, Deficient spending (government), Cost-push (producers, businesses(wage price spiral))

15

What does creeping inflation mean?

That the economy is expanding