All Flashcards
What is the impact of increasing the money supply on inflation?
Increasing the money supply can lead to higher inflation if aggregate demand increases.
What is the impact of contractionary fiscal policy on inflation?
Contractionary fiscal policy (e.g., higher taxes) can reduce inflationary pressures.
How can interest rate hikes combat inflation?
Interest rate hikes reduce borrowing and spending, curbing aggregate demand and inflation.
What is the effect of wage controls on inflation?
Wage controls can temporarily suppress inflation, but may distort labor markets.
How does reducing government spending affect inflation?
Reducing government spending decreases aggregate demand, potentially lowering inflation.
What is the impact of supply-side policies on inflation?
Supply-side policies can increase aggregate supply, easing inflationary pressures.
How does quantitative easing affect inflation?
Quantitative easing can increase inflation if it leads to excessive money supply growth.
What is the role of fiscal policy in managing deflation?
Fiscal policy (e.g., increased spending) can stimulate demand and combat deflation.
How does exchange rate policy affect inflation?
A stronger currency can reduce import prices, lowering inflation.
What is the impact of price ceilings on inflation?
Price ceilings can lead to shortages and black markets, exacerbating inflationary pressures.
Analyze the historical US inflation rate graph.
Recessions usually bring lower inflation, except during stagflation (e.g., 1970s oil crises).
What is the Consumer Price Index (CPI)?
Measures average price changes of a basket of consumer goods and services.
What is inflation?
A general increase in prices across an economy over time.
What is deflation?
A general decrease in prices across an economy over time.
What is disinflation?
A slowing down in the rate of inflation.
What is the inflation rate?
The percentage change in the overall price level of an economy within a year.
What are real variables?
Economic values adjusted to remove the effects of inflation.
What is a price index?
A tool to track changes in the general price level over time.
What is a market basket?
A fixed set of goods and services used to track inflation.
What is the base year in CPI calculation?
The reference year for the CPI, always set to 100.
What is stagflation?
High inflation combined with a slow economy.