EC140 - 2025 - Class 6 - Inflation - B

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Consumer Price Index (CPI)

A measure that examines the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Core Inflation

A measure of inflation that excludes certain items that face volatile price movement, specifically food and energy.

Nominal Variables

Economic measures that have not been adjusted for inflation.

Real Variables

Economic measures that have been adjusted for inflation.

Participation Rate

The percentage of the working-age population that is part of the labor force, either employed or actively seeking employment.

Unemployment Rate

The percentage of the labor force that is unemployed and actively seeking employment.

Money Illusion

The tendency of people to think of currency in nominal terms rather than real purchasing power.

Real Interest Rate

The interest rate that has been adjusted to remove the effects of inflation, reflecting the true cost of borrowing.

Expected Inflation

The rate of inflation that consumers and businesses expect to occur in the future.

Hyperinflation

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

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy.

Youth Employment Rate

The proportion of the youth labor force that is employed.

Real Wages

Wages that have been adjusted for inflation, reflecting the actual purchasing power of income.

Nominal Wage Rigidity

The phenomenon where wages do not adjust downward easily, often leading to higher unemployment during economic downturns.

Bitcoin

A type of digital currency that is decentralized and operates on a technology called blockchain.

Menu Costs

The costs associated with changing prices, such as reprinting menus or catalogs.

Shoe-leather Costs

The costs of time and effort that people spend to go out and minimize their cash holdings during inflation.

All-items CPI

The Consumer Price Index that includes all categories of goods and services.

PPI - Producer Price Index

An index that measures the weighted average of prices that producers receive for their products.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Economic Cycle

The fluctuations in economic activity that an economy experiences over a period, typically involving expansion and contraction.