Costs of Inflation and Deflation

What is Inflation?

• Inflation is a decrease in the general level of prices

• Inflation is an increase in the general level of prices

• Inflation is a number that that compares prices in one year with prices with some earlier base year

When inflation is high the _______________of the dollar decreases

• cost value
• purchasing power
• importance
• validity

With inflation, AD > AS 

• True
• False

Demand-Pull inflation can be describes as too many _________ chasing too few __________

• jobs, workers
• consumers, producers
• dollars, goods

What causes Cost-Push inflation?

• An increase in demand for goods and services

• An increase in supply

• A rise in production costs passed on to consumers

• A fall in the price of imports

What the definition of deflation?

• decrease in the average price of goods and services

• occurs when the price of goods and services rise

• the amount one dollar can buy is reduced

After Haiti's earthquake destroyed much of the productive capital in the nation, it also experienced massive inflation. This inflation was likely

• Demand-pull

• Cost-push

Who is most likely to be hurt by inflation?

• someone who borrowed money
• a retiree on a fixed income
• The US Government

A person who borrows a 30 year fixed rate mortgage is likely to benefit from inflation. True or False?

• True

• False

During a recession, inflation is likely to be..

• High

• Low