Inflation and its Economic Effects

<p>Increased global trade and wage stickiness. (B)</p> Signup and view all the answers

<p>Adjusting interest rates to influence economic activity. (B)</p> Signup and view all the answers

<p>It reduces inflation by slowing down borrowing and spending. (B)</p> Signup and view all the answers

<p>The rate where monetary policy neither stimulates nor restricts growth. (B)</p> Signup and view all the answers

<p>Central banks lose the ability to stimulate the economy using rate cuts. (A)</p> Signup and view all the answers

<p>It is only calculated nationally, not locally. (D)</p> Signup and view all the answers

<p>Rising inflation increases the overall cost of student loans. (D)</p> Signup and view all the answers

<p>Inflation remained subdued, surprising many economists. (A)</p> Signup and view all the answers

<p>It delays wage increases, thus slowing inflation. (A)</p> Signup and view all the answers

<p>It typically lowers inflation by introducing more affordable imports. (D)</p> Signup and view all the answers

<p>Differences in spending habits can lead to varied experiences of inflation. (A)</p> Signup and view all the answers

<p>Competitive pressures lead firms to resist raising prices and wages. (D)</p> Signup and view all the answers

<p>By increasing the money supply to encourage spending. (C)</p> Signup and view all the answers

<p>It reduces purchasing power due to rising costs. (A)</p> Signup and view all the answers

<p>It tends to lower inflation rates significantly. (B)</p> Signup and view all the answers

Retirees on fixed incomes are hurt by inflation because their income doesn't increase along with rising prices.

Inflation reduces the real value of loan repayments because the money used to repay the loan buys less than it did when the loan was taken out.

The Phillips Curve shows an inverse relationship between unemployment and inflation. Lower unemployment tends to be associated with higher inflation, and vice versa.

The Phillips Curve is less reliable today because of factors like global trade and wage stickiness.

Central banks influence inflation primarily through adjustments in interest rates to control economic activity.

Raising interest rates reduces inflation by making borrowing and spending less attractive.

The neutral interest rate is the rate at which monetary policy has no effect on the economy's growth.

When interest rates approach zero, central banks struggle to stimulate the economy because they cannot lower rates further.

Rising inflation increases the cost of student loans and other educational expenses.

Inflation remained low despite a drop in unemployment after the 2008 financial crisis, surprising economists.

Wage stickiness slows inflation by delaying wage increases in response to higher prices.

Global trade can lower domestic inflation by introducing cheaper imports.

Families experience inflation differently based on spending. Those spending more on rising-priced items feel higher inflation than others.

Low inflation can persist despite low unemployment due to firms resisting price increases because of competition.

Central banks often lower interest rates to prevent deflation, encouraging borrowing and spending.

Inflation reduces the purchasing power of fixed-income investments, as the real value of savings shrinks.

Central bank actions can mask the relationship between inflation and unemployment because they stabilize both before the relationship can be observed.

A global savings glut can decrease inflation by increasing the supply of capital and reducing interest rates.