INFLATION IN ECONOMICS QUESTIONS AND GRADED
ANSWERS, 100% GUARANTEE
What is inflation? - • An increase in the price of goods & services that is representative of
the economy as a whole
• The upward movement in the average level of prices
What two ways can we measure inflation? - Price index and consumer price index
Price Index - • A measurement that shows how the average price of a standard group of
goods changes over time
• Produces an average that economists compare to see how much prices have changed.
Consumer Price Index - • Computed each month by the Bureau of Labor Statistics
• Determined by measuring the price of a standard group of goods meant to represent the market
basket of a typical urban customer
What are the 4 main causes of inflation? - • Supply of money goes up
• Supply of money goes down
• Demand for money goes up
• Demand for money goes down
What is demand pull inflation? - Inflation caused by an increase in aggregate demand.
What is aggregate demand? - Demand for all the goods and services we sell
What are 3 causes of demand pull inflation? - • Increase in money supply
• Increase in government purchases
ANSWERS, 100% GUARANTEE
What is inflation? - • An increase in the price of goods & services that is representative of
the economy as a whole
• The upward movement in the average level of prices
What two ways can we measure inflation? - Price index and consumer price index
Price Index - • A measurement that shows how the average price of a standard group of
goods changes over time
• Produces an average that economists compare to see how much prices have changed.
Consumer Price Index - • Computed each month by the Bureau of Labor Statistics
• Determined by measuring the price of a standard group of goods meant to represent the market
basket of a typical urban customer
What are the 4 main causes of inflation? - • Supply of money goes up
• Supply of money goes down
• Demand for money goes up
• Demand for money goes down
What is demand pull inflation? - Inflation caused by an increase in aggregate demand.
What is aggregate demand? - Demand for all the goods and services we sell
What are 3 causes of demand pull inflation? - • Increase in money supply
• Increase in government purchases
