Inflation

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The rate of inflation is most commonly measured by use of

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the consumer price index

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The consumer price index measures

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the cost of buying a fixed basket of goods and services, and calculating how this cost changes from year to year

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An increase in aggregate demand is likely to lead to

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demand-pull inflation

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Demand-pull inflation and cost-push inflation differ in that

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demand-pull leads to higher real GDP and cost-push to lower real GDP

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What is inflation?

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Inflation is an economic term that describes a general increase in prices 📈 and a fall in the purchasing power of money 📉.

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A little inflation is normal and even good for a healthy economy. Inflation becomes a problem when it grows too quickly.

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True

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What causes inflation?

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inflation occurs when there's an increase in production costs OR when demand for products and services increases faster than supply

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Money supply creates inflation only when ...

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the money is printed faster than the economy grows.

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Inflation reduced people's purchasing power because

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the same amount of money buys fewer goods and services

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Who is most likely to be hurt by inflation? Options: someone who borrowed money, a retiree on a fixed income, a business owner, the U.S. government

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a retiree on a fixed income