Questions and Answers
What is inflation?
Inflation refers to a gradual increase in the general level of prices, which reduces the purchasing power of money.
What causes demand-pull inflation?
Demand-pull inflation occurs when the aggregate demand for goods and services exceeds aggregate supply, leading to higher prices.
Define cost-push inflation.
Cost-push inflation happens when a rise in the costs of production is passed on to consumers in the form of higher prices.
What is the nominal interest rate?
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How is the real interest rate different from the nominal interest rate?
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List one cause of inflation related to rising incomes.
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How do indirect taxes contribute to inflation?
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What effect does currency depreciation have on inflation?
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What is deflation?
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Name one problem caused by deflation.
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How is the Consumer Price Index (CPI) measured?
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What is one use of the CPI?
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What role does the European Central Bank (ECB) play in price stability?
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What happens to the purchasing power of money during inflation?
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How does inflation affect those on fixed incomes?
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What is the impact of inflation on debt repayments?
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Why does investment fall during high inflation?
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How does inflation affect savings?
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Why might borrowed money be easier to repay during inflation?
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