Understanding Inflation

The video explains inflation, starting with the Big Mac's price change since 1967. It covers how inflation is measured and its role in setting welfare payments and salary negotiations. Hyperinflation examples from Zimbabwe and Germany illustrate extreme cases. While some inflation is beneficial for economic growth and debt reduction, it can erode savings. Inflation is a fundamental yet simple economic concept, representing the average rate of price increases.

What was the original price of the Big Mac when it was launched in 1967?

• $0.45

• $3.99

• $1.00

• $2.50

What is the primary purpose of calculating the rate of inflation?

• To set welfare payments and guide salary negotiations

• To predict stock market trends

• To calculate GDP growth

• To determine the cost of living

In 2008, how often did prices double in Zimbabwe due to hyperinflation?

• Every month

• Every week

• Every 24 hours

• Every 12 hours

What drastic measure did Zimbabwe take to address its hyperinflation?

• Increased interest rates

• Devalued its currency

• Printed more money

• Ran out of paper for banknotes

How can a small amount of inflation benefit an economy?

• By stabilizing currency value

• By increasing savings

• By reducing unemployment

• By encouraging spending and investment

Why is inflation considered bad news for savers?

• It increases the value of savings

• It decreases the purchasing power of saved money

• It leads to higher interest rates

• It causes deflation

What is one positive aspect of inflation for those in debt?

• It decreases the real value of debt

• It causes deflation

• It increases the real value of debt

• It leads to higher interest rates

What is the average rate at which prices rise in a stable economy?

• 1-2% per year

• 0.5% per year

• 5% per year

• 10% per year

What is the simplest definition of inflation?

• The decrease in the value of money

• The average rate at which prices are rising

• The fluctuation of currency exchange rates

• The increase in the value of goods

What is one of the most important concepts in economics according to the video?

• Fiscal policy

• Inflation

• Supply and demand

• Monetary policy