Inflation and Deflation

The video explains inflation, a general increase in prices and decrease in money's purchasing power. It uses a real estate example to illustrate inflation's impact. Hyperinflation, a severe form of inflation, is discussed with examples from Zimbabwe. The Consumer Price Index (CPI) is introduced as a tool to measure inflation. The video outlines three main causes of inflation: excess currency, increased demand, and higher production costs. It also touches on deflation, the opposite of inflation, and its negative economic effects. The importance of moderate inflation for economic growth is emphasized.

What is the primary reason for the increase in prices over long periods?

• Inflation

• Supply and demand

• Deflation

• Economic growth

What is hyperinflation?

• A decrease in the value of money

• A slight increase in prices

• A controlled inflation rate

• Inflation that is out of control

What tool do economists use to measure the average price change of goods over time?

• Interest Rates

• Stock Market Index

• Gross Domestic Product

• Consumer Price Index

Which theory suggests that too much currency can lead to inflation?

• Demand-pull theory

• Cost-push theory

• Supply-side theory

• Quantity theory

What happens when producers face higher production costs?

• They maintain their prices

• They raise their prices

• They lower their prices

• They stop production

Who is most affected by inflation?

• Investors

• People with fixed incomes

• Business owners

• People with variable incomes

What is deflation?

• An increase in the overall level of prices

• A rapid increase in purchasing power

• A reduction in the overall level of prices

• A stable price level