Chapter 7: Inflation and the Measurement of Prices

Inflation

Inflation

________ is the rise in the general level of prices in an economy.

Price indices

________ can be used to translate nominal values to real values that allow us to compare the purchasing power of money over time by adjusting for inflation.

Disinflation

________ is a period of positive but falling inflation.

Deflation

________ indicates a period of declining prices of goods and services.

barter system

In a(n) ________, each good or service must be compared against all other goods or services for which it could trade.

inflation rate

The ________ between two time periods is simply the percentage change in the price index between the periods.

Demand

________ pull inflation arises from increases in aggregate demand.

Real values

Real values are values that have been adjusted for inflation.

Nominal value

Nominal value are values that have not been adjusted tor inflation.

Demand pull inflation

Demand pull inflation arises from increases in aggregate demand.

Cost push inflation

Cost push inflation arises from decreases in aggregate supply