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Unit 3: Inflation Questions with Detailed Verified Answers
(100% Correct Answers) /Already Graded A+
What is inflation?
Ans: Inflation is an increase in the average level of prices.
What is the inflation rate?
Ans: The inflation rate is the percentage change in the average level of prices
(as measured by a price index) over a period of time.
What is the CPI?
Ans: --Consumer price index (CPI): Measures the average price for a basket
of goods and services bought by a typical American consumer. The index
covers some 80,000 goods and is weighted so that an increase in the price of a
major item such as housing counts for more than an increase in the price of a
minor item like kitty litter.
--As a result of these challenges, some economists suggest that the CPI may
actually overstate inflation by a little bit every year (0.9% is one estimate).
--The CPI is often used to calculate "real prices."
What is a real price
Ans: A real price is a price that has been corrected for inflation. Real prices
are used to compare the prices of goods over time.
What causes inflation (in the long-run)?
Ans: An increase in the supply of money.
What is deflation?
Ans: Deflation is a decrease in the average level of prices (a negative inflation
rate).
What is disinflation?
Approved By:
vPretest - Stuvia US
Unit 3: Inflation Questions with Detailed Verified Answers
(100% Correct Answers) /Already Graded A+
What is inflation?
Ans: Inflation is an increase in the average level of prices.
What is the inflation rate?
Ans: The inflation rate is the percentage change in the average level of prices
(as measured by a price index) over a period of time.
What is the CPI?
Ans: --Consumer price index (CPI): Measures the average price for a basket
of goods and services bought by a typical American consumer. The index
covers some 80,000 goods and is weighted so that an increase in the price of a
major item such as housing counts for more than an increase in the price of a
minor item like kitty litter.
--As a result of these challenges, some economists suggest that the CPI may
actually overstate inflation by a little bit every year (0.9% is one estimate).
--The CPI is often used to calculate "real prices."
What is a real price
Ans: A real price is a price that has been corrected for inflation. Real prices
are used to compare the prices of goods over time.
What causes inflation (in the long-run)?
Ans: An increase in the supply of money.
What is deflation?
Ans: Deflation is a decrease in the average level of prices (a negative inflation
rate).
What is disinflation?
Approved By:
vPretest - Stuvia US
