Introduction to Consumer Price Index and Inflation

These flashcards cover key concepts related to Consumer Price Index (CPI), inflation, and the economic effects of price changes over time.

Consumer Price Index (CPI)

A measure that examines the weighted average of prices of a basket of consumer goods and services.

Base Year

A year used as a benchmark to compare prices in other years, typically set to an index of 100.

Annual Rate of Inflation

The percentage increase in the price level from one year to the next.

Cumulative Inflation

The total increase in the price level over multiple years.

Hyperinflation

An extremely high and typically accelerating rate of inflation, often exceeding 50% per month.

Deflation

A decrease in the general price level of goods and services.

Nominal Wage

The wage that is paid to workers, not adjusted for inflation.

Real Wage

The wage that has been adjusted for inflation, reflecting purchasing power.

Purchasing Power

The amount of goods and services that one unit of currency can buy.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy.