Chap 14: Inflation and Disinflation

These flashcards contain key vocabulary terms and definitions related to inflation and disinflation, ensuring a comprehensive review of the concepts covered in the lecture.

Inflation

A sustained increase in the general price level of goods and services in an economy over a period of time.

Disinflation

A decrease in the rate of inflation – a slowdown in the rate of increase of the general price level.

NAIRU

Non-Accelerating Inflation Rate of Unemployment, the level of unemployment at which inflation does not increase.

Self-fulfilling expectation

An expectation that influences individuals to act in a way that causes the expectation to come true.

Constant Inflation

A situation where the inflation rate remains at a consistent level, such as 2%, over a period of years.

Backward-looking expectation

A mindset where decisions are based on past events, assuming history will repeat itself.

Forward-looking expectation

A perspective where individuals base their decisions on predictions about future events.

Monetary validation

The process by which the central bank's monetary policy actions support and sustain inflation.

Adjustment process

A period in which the economy deviates from long-run equilibrium, affecting factors like inflation and unemployment.

Supply shocks

Unexpected events that affect the supply side of the economy, potentially impacting prices and inflation.