Exploring the Mechanics of Inflation

The video explores inflation, its causes, and its impact on the economy. It discusses demand-pull and cost-push inflation, Milton Friedman's monetary theory, and how inflation is measured using the Consumer Price Index. The video also examines the effects of inflation, including hyperinflation, and the role of central banks in managing inflation levels.

What is the primary reason for the constant increase in prices over time?

• Government policies

• Inflation

• Decrease in product quality

• Increase in global demand

Which type of inflation occurs when the cost of production inputs increases?

• Demand-pull inflation

• Deflation

• Cost-push inflation

• Stagflation

What is a common effect of demand-pull inflation?

• Lower consumer spending

• Prices rise due to high demand

• Increased supply of goods

• Decreased production costs

What does Milton Friedman's theory suggest is the primary cause of inflation?

• Government spending

• Increase in money supply

• Trade deficits

• Consumer behavior

How do central banks typically try to control inflation?

• By setting interest rates

• By reducing taxes

• By decreasing government spending

• By increasing money supply

What does CPI stand for in economic terms?

• Costly Product Index

• Consumer Product Inflation

• Cost Price Increase

• Consumer Price Index

What does the core inflation measure exclude?

• Volatile items like oil

• Stable items like technology

• All imported goods

• All services

What was a significant consequence of Paul Volcker's policy in the 1980s?

• Stable housing market

• Economic boom

• Decrease in unemployment

• Recession and high unemployment

Which event did NOT contribute to the inflation of the 1970s?

• Removal of price controls

• Iranian Revolution

• Oil embargo

• Tech stock crash

What historical example illustrates hyperinflation?

• France in the 1800s

• Japan in the 1990s

• Brazil from 1980 to 1995

• USA in the 2000s