Inflation Flashcards

Flashcards about Inflation. These flashcards are designed to help you review the key concepts, definitions, and formulas related to inflation, its measurement, and its impact on the economy.

Inflation

An increase in the general (average) price level of goods and services in the economy

Deflation

A decrease in the general (average) price level of goods and services in the economy

Consumer Price Index (CPI)

An index that measures changes in the average prices of consumer goods and services

Base Year

A year chosen as a reference point for comparison with some earlier or later year

Inflation Rate

The percentage change in the official consumer price index from one year to the next

Disinflation

A reduction in the rate of inflation

Nominal Income

The actual number of dollars received over a period of time

Real Income

The actual number of dollars received (nominal income) adjusted for changes in the CPI

Wealth

The value of the stock of assets owned at some point in time

Nominal Interest Rate

The actual rate of interest without adjustment for the inflation rate

Real Interest Rate

The nominal rate of interest minus the inflation rate

Adjustable-Rate Mortgage (ARM)

A home loan that adjusts the nominal interest rate to changes in an index rate, such as rates on Treasury securities

Hyperinflation

An extremely rapid rise in the general price level

Inflation Psychosis

A situation in which people spend their earnings immediately in order to avoid paying even more tomorrow

Wage-Price Spiral

A situation that occurs when increases in nominal wage rates are passed on in higher prices, which, in turn, result in even higher nominal wage rates and prices

Demand-Pull Inflation

A rise in the general price level resulting from an excess of total spending (demand)

Cost-Push Inflation

An increase in the general price level resulting from an increase in the cost of production