Inflation - Video "INFLATION, Explained in 6 Minutes"

What is the simplest definition of inflation?

• When the government prints more money

• When there is less money in the economy than stuff to spend it on

• When there is more money in the economy than stuff to spend it on

• When the prices of goods decrease

In the village example, what did the government do to stimulate the economy?

• Increased taxes

• Reduced interest rates & dropped off a giant pile of cash for everyone

• Increased interest rates

• Closed the market

What happens when there is extra money floating around and people want to spend it faster than businesses can make stuff?

• Deflation

• Recession

• Inflation

• Stagnation

Why did the store owner in the village example raise his prices?

• Because he was running out of bikes and other goods

• Because he wanted to make more profit

• Because the government told him to

• Because he wanted to reduce demand

What is a recession?

• When prices of goods and services increase rapidly

• When the economy grows too fast

• When people don't have enough to buy & the economy slows down so businesses lay off employees

• When the government prints more money

What did governments do during COVID to keep the economy going?

• Increased interest rates

• Gave out free money and subsidies

• Closed all businesses

• Increased taxes

What is the role of a central bank, like the Federal Reserve, (Reserve Bank of NZ for us) in the economy?

• To make a profit

• To store money for people

• To set rules and policies for other banks and manage the economy

• To print money

How does a lower interest rate affect borrowing and spending?

• It discourages borrowing and spending

• It has no effect

• It encourages borrowing and spending

• It only affects businesses

What happens when there is too much money to borrow and spend but not enough goods and services?

• Inflation

• Stagnation

• Deflation

• Recession

What does it mean when your money is worth less due to inflation?

• Your purchasing power increases

• Your purchasing power decreases

• Prices of goods decrease

• You have more money