Economic Concepts - Inflation and Price Indexes

Flashcards on key economic terms and concepts related to inflation and price indexes, essential for understanding macroeconomic principles.

Inflation

The general rise in prices over time, decreasing the purchasing power of money.

Deflation

The decrease in prices over time, leading to increased purchasing power.

Demand-pull inflation

Inflation caused by increasing demand exceeding supply.

Cost-push inflation

Inflation caused by rising costs of production leading to decreased supply.

Core Inflation

The price changes of stable goods, ignoring volatile price changes in commodities.

Hyperinflation

An exceptionally rapid rate of inflation that can devastate an economy.

Consumer Price Index (CPI)

Measures the average change in prices paid by consumers for a fixed basket of goods.

Price Index

Represents the average change in prices of a defined set of goods over time.

Anticipated inflation

Inflation that is expected and can be planned for by consumers and businesses.

Unanticipated inflation

Unexpected inflation that can lead to shifts in real income and wealth.

Real interest rate

The nominal interest rate adjusted for inflation.

Nominal interest rate

The stated interest rate that is not adjusted for inflation.

Personal Consumption Expenditures (PCE)

An adjustable basket index that accounts for changes in consumer behavior.

Producer Price Index (PPI)

Measures the average change in selling prices received by domestic producers.

Price index calculation for example year

Calculation method to compare current prices against a base year.

Cost of Living Adjustments (CoLA)

Adjustments made to wages to reflect changes in the cost of living due to inflation.