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Macroeconomics: Inflation

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Termini in questo insieme (19)

  • What is inflation?

    Inflation is the general increase in prices of goods and services over time, reducing the purchasing power of money.

  • How is inflation measured?

    Inflation is commonly measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI), which track price changes of a basket of goods and services.

  • What causes demand-pull inflation?

    Demand-pull inflation occurs when aggregate demand exceeds aggregate supply, pushing prices up.

  • What is cost-push inflation?

    Cost-push inflation happens when rising production costs, like wages or raw materials, increase overall prices.

  • What is the difference between nominal and real values?

    Nominal values are measured in current prices, while real values are adjusted for inflation to reflect true purchasing power.

  • How does inflation affect purchasing power?

    Inflation decreases purchasing power because as prices rise, each unit of currency buys fewer goods and services.

  • What is hyperinflation?

    Hyperinflation is an extremely high and typically accelerating inflation rate, often exceeding 50% per month.

  • What is deflation?

    Deflation is the general decline in prices, the opposite of inflation, which can lead to reduced economic activity.

  • What is the inflation rate formula?

    The inflation rate is calculated as \(\frac{P_t - P_{t-1}}{P_{t-1}} \times 100\%\), where P is the price level at time t.

  • What is the Phillips Curve?

    The Phillips Curve shows an inverse relationship between inflation and unemployment in the short run.

  • How does inflation impact savers and borrowers?

    Inflation hurts savers by eroding the value of saved money but benefits borrowers by reducing the real value of debt.

  • What role does the central bank play in controlling inflation?

    Central banks use monetary policy, like adjusting interest rates, to control inflation and stabilize the economy.

  • What is the difference between headline and core inflation?

    Headline inflation includes all items, while core inflation excludes volatile food and energy prices for a clearer trend.

  • What is the quantity theory of money?

    The quantity theory of money states that inflation is caused by too much money chasing too few goods, expressed as \(MV=PY\).

  • What is anticipated vs. unanticipated inflation?

    Anticipated inflation is expected and can be planned for, while unanticipated inflation causes uncertainty and can distort economic decisions.

  • How does inflation affect income distribution?

    Inflation can redistribute income by benefiting debtors and hurting those on fixed incomes or with cash savings.

  • What is the real interest rate formula?

    The real interest rate is approximately \(r = i - \pi\), where i is nominal interest and \(\pi\) is inflation rate.

  • What is the impact of inflation on menu costs?

    Menu costs are the costs businesses face when changing prices frequently due to inflation.

  • What is the role of expectations in inflation?

    Inflation expectations influence wage demands and price setting, potentially making inflation self-fulfilling.