Studied by 0 peopleDeflation
________: situation in which the prices of most goods and services are falling over time so that inflation is negative.
Hyperinflation
________: situation in which the inflation rate is extremely high.
Inflation
________- protected bonds: bonds that pay a nominal interest rate each year equal to a fixed real rate plus the actual rate of inflation during that year.
Consumer price index (CPI)
for any period, a measure of the cost in that period of a standard basket of goods and services relative to the cost of the same basket of goods and services in a fixed year, called the base year
Price index
measure of the average price of a given quality of goods or services relative to the price of the same goods or services in a base year
Rate of inflation
annual percentage rate of change in the price level, as measured, for example, by the CPI
Deflation
situation in which the prices of most goods and services are falling over time so that inflation is negative
Core rate of inflation
rate of increase of all prices except energy and food
Nominal quantity
quantity that is measured in terms of its current dollar value
Deflating (a nominal quantity)
process of dividing a nominal quantity by a price index (such as the CPI) to express the quantity in real terms
Real wage
wage paid to workers measured in terms of purchasing power; the real wage for any given period is calculated by dividing the nominal (dollar) wage by the CPI for that period
Indexing
practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index
Price level
measure of the overall level of prices at a particular point in time as measured by a price index such as the CPI
Relative price
price of a specific good or service in comparison to the prices of other goods and services
Hyperinflation
situation in which the inflation rate is extremely high
Real interest rate
annual percentage increase in the in purchasing power of a financial asset; the real interest rate on any asset equals the nominal interest rate on that asset minus the inflation rate
Nominal interest rate (or market interest rate)
annual percentage increase in the nominal value of a financial asset
Inflation-protected bonds
bonds that pay a nominal interest rate each year equal to a fixed real rate plus the actual rate of inflation during that year
Fisher effect
tendency for nominal interest rates to be high when inflation is high and low when inflation is low
Consumer price index (CPI)
For any period, a measure of the cost in that period of a standard basket of goods and services relative to the cost of the same basket of goods and services in a fixed year, called the base year
Price index
Measure of the average price of a given quality of goods or services relative to the price of the same goods or services in a base year
Rate of inflation
Annual percentage rate of change in the price level, as measured, for example, by the CPI
Deflation
Situation in which the prices of most goods and services are falling over time so that inflation is negative
Core rate of inflation
Rate of increase of all prices except energy and food
Nominal quantity
Quantity that is measured in terms of its current dollar value
Real quantity
Quantity that is measured in physical terms for example, in terms of quantities of goods and services
Deflating (a nominal quantity)
Process of dividing a nominal quantity by a price index (such as the CPI) to express the quantity in real terms
Real wage
Wage paid to workers measured in terms of purchasing power; the real wage for any given period is calculated by dividing the nominal (dollar) wage by the CPI for that period
Indexing
Practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index
Price level
Measure of the overall level of prices at a particular point in time as measured by a price index such as the CPI
Relative price
Price of a specific good or service in comparison to the prices of other goods and services
Hyperinflation
Situation in which the inflation rate is extremely high
Real interest rate
Annual percentage increase in the in purchasing power of a financial asset; the real interest rate on any asset equals the nominal interest rate on that asset minus the inflation rate
Nominal interest rate (or market interest rate)
Annual percentage increase in the nominal value of a financial asset
Inflation-protected bonds
Bonds that pay a nominal interest rate each year equal to a fixed real rate plus the actual rate of inflation during that year
Fisher effect
Tendency for nominal interest rates to be high when inflation is high and low when inflation is low
Note 
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