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Questions and Answers
What is inflation in economics?
What is inflation in economics?
- An increase in the production of goods and services in an economy
- A stable level of prices of goods and services in an economy
- A decrease in the prices of goods and services in an economy
- A general increase in the prices of goods and services in an economy (correct)
What corresponds to a reduction in the purchasing power of money?
What corresponds to a reduction in the purchasing power of money?
- GDP growth
- Stable prices
- Inflation (correct)
- Deflation
How is inflation usually measured?
How is inflation usually measured?
- Using the consumer price index (CPI) (correct)
- Using the unemployment rate
- Using the gross domestic product (GDP)
- Using the exchange rate
What is the common measure of inflation?
What is the common measure of inflation?
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What is the opposite of CPI inflation?
What is the opposite of CPI inflation?
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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.
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