5 Questions
What is inflation in economics?
A general increase in the prices of goods and services in an economy
What corresponds to a reduction in the purchasing power of money?
Inflation
How is inflation usually measured?
Using the consumer price index (CPI)
What is the common measure of inflation?
Inflation rate, the annualized percentage change in a general price index
What is the opposite of CPI inflation?
Deflation
Study Notes
Inflation in Economics
- Inflation is a sustained increase in the general price level of goods and services in an economy over time.
Reduction in Purchasing Power
- A reduction in the purchasing power of money corresponds to inflation, where the same amount of money can buy fewer goods and services than it could before.
Measuring Inflation
- Inflation is usually measured as an annual percentage increase in the general price level.
Common Measure of Inflation
- The Consumer Price Index (CPI) is the common measure of inflation, which tracks the average change in prices of a basket of goods and services consumed by households.
Opposite of CPI Inflation
- Deflation, which is a sustained decrease in the general price level of goods and services in an economy over time, is the opposite of CPI inflation.
Test your knowledge of inflation and deflation with this quiz. Challenge yourself with questions about the causes, effects, and measurement of inflation, as well as the impact of deflation on the economy. Understand the concepts of purchasing power and the consumer price index (CPI) in this informative quiz.
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