Types
What type of inflation occurs when demand for goods and services exceeds supply?
Demand-pull inflation
What does "CPI" stand for when measuring inflation?
Consumer Price Index
What decade in the United States is known for a period of high inflation, peaking at over 13% in 1980?
The 1970s.
What happens to the purchasing power of money during inflation?
It decreases
Which institution is primarily responsible for controlling inflation in most countries?
The central bank
What type of inflation is caused by an increase in production costs, such as wages or raw materials?
Cost-push inflation
What inflation index measures the average change over time in the prices received by domestic producers for their output?
Producer Price Index (PPI)
Which country experienced hyperinflation in the 1920s after World War I, leading to the collapse of its currency?
Germany (Weimar Republic)
What term refers to the phenomenon where wages increase, leading to higher prices, which in turn leads to demands or higher wages?
Wage-price spiral
What is the main tool used by central banks to manage inflation?
Interest rates
What is the term for an extreme, out-of-control rise in prices, often exceeding 50% per month?
Hyperinflation
What term descrobes inflation that excludes food and energy prices due to their volatility?
Core inflation
In 2008, which African couuntry experienced inflation rates exceeding 79 billion percent?
Zimbabwe
How does inflation generally affect the value of savings held in cash?
It erodes the value of savings
What term describes the use of government spending and tax policies to influence inflation?
Fiscal policy
Which type of inflation occurs when businesses raise prices to cover increased wages without corresponding productivity gains?
Wage-price inflation
What is the name of the index used to adjust Social Security benefits for inflation in the United States?
Cost of Living Adjustment (COLA).
What global event caused deflation rather than inflation during the 1930s?
The Great Depression
What effect does inflation typically have on the real interest rate if nominal rates remain unchanged?
It decreases the real interest rate
Which U.S central bank raised interest rates dramatically in the early 1980s to combat inflation
The Federal Reserve
What is the term for inflation that occurs due to excessive expansion of the money supply by a government?
Monetary inflation
Which international organization uses the Harmonized Index of Consumer Prices (HICP) to measure inflation across member countries?
The European Union
What was the name of the 1971 policy where in the U.S. abandoned the gold standard, leading to inflationary pressures?
The Nixon Shock
How does unanticipated inflation affect borrowers and lenders?
Borrowers benefit, and lenders lose, because the real value of repayment is lower
What its the term for reducing the money supply to control inflation by selling government bonds or increasing reserve requirements for banks
Contractionary monetary policy