What are the differences between inflation and deflation?
Inflation is a general increase in prices; deflation is a general decrease in prices.
What are the differences between disinflation and deflation?
Disinflation is a slowing of inflation; deflation is a decrease in prices.
What are the differences between nominal and real GDP?
Nominal GDP is current prices; real GDP is adjusted for inflation.
What are the differences between CPI and PPI?
CPI measures consumer prices; PPI measures producer prices.
What are the differences between cost-push and demand-pull inflation?
Cost-push: rising costs; demand-pull: increased demand.
What is the difference between headline and core inflation?
Headline inflation includes all items; core inflation excludes volatile items like food and energy.
What is the difference between expected and unexpected inflation?
Expected inflation is anticipated; unexpected inflation is a surprise.
What is the difference between CPI and GDP deflator?
CPI measures a fixed basket; GDP deflator measures all goods/services in GDP.
What is the difference between hyperinflation and galloping inflation?
Hyperinflation is very rapid; galloping inflation is accelerating.
What is the difference between frictional and structural unemployment?
Frictional unemployment is temporary; structural unemployment is skills mismatch. (Related to inflation's impact on the labor market)
How does inflation affect purchasing power?
Inflation reduces purchasing power as each unit of currency buys fewer goods/services.
How is CPI used to adjust wages?
CPI is used to adjust wages to maintain real purchasing power amidst inflation.
How does substitution bias affect CPI accuracy?
Substitution bias overstates inflation because consumers switch to cheaper goods.
How do central banks use inflation targets?
Central banks use inflation targets to maintain economic stability.
What is the impact of deflation on borrowing?
Deflation increases the real burden of debt, discouraging borrowing and investment.
How does unanticipated inflation affect lenders?
Unanticipated inflation hurts lenders because the money repaid is worth less.
How does CPI help in international comparisons?
CPI helps compare inflation rates between countries, aiding economic analysis.
How does inflation impact savings?
Inflation erodes the real value of savings if interest rates don't keep pace.
How does disinflation affect business investment?
Disinflation can create uncertainty, potentially delaying business investment decisions.
How does CPI influence social security payments?
CPI is used to adjust Social Security benefits to maintain retirees' living standards.
Analyze the historical US inflation rate graph.
Recessions usually bring lower inflation, except during stagflation (e.g., 1970s oil crises).
