Midterm Topic 12 Flashcards

1
Q

inflation

A

change of the price level that repeats itself over periods of time [steady change in the price level]

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2
Q

what causes inflation?

A

inflation (pi>0) is caused when nominal money supply grows faster than real GDP.

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3
Q

what causes deflation?

A

deflation (pi<0) is caused when real GDP grows faster than nominal money supply

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