Inflation and Stagflation Flashcards

Questions and Answers

What can cause hyperinflation?

Decrease in production costs

Government reducing interest rates

Increase in supply of goods

Government printing a ton of money to pay off its debt (correct)

Inflation causes money to BLANK its value over time.

lose

What led to a period of stagflation?

Rising unemployment and inflation

How does demand pull inflation differ from cost push inflation?

Demand pull inflation is driven by consumers, while cost push inflation is driven by producers. Signup and view all the answers

What is one consequence of stagflation?

The economy drastically slows down as money loses its buying power. Signup and view all the answers

What is the direct effect when demand increases?

Producers raise prices to continue to make a profit. Signup and view all the answers

What happens when demand for goods increases?

Demand pull inflation occurs. Signup and view all the answers

Typically, high inflation is a sign of?

A struggling economy. Signup and view all the answers

Which scenario is an example of demand pull inflation?

Consumers have more money to buy cars, and the prices of cars and car accessories rise as a result. Signup and view all the answers

What will most likely result from consumers having more money to purchase computers?

An increase in prices for computers and computer accessories. Signup and view all the answers

Study Notes

Hyperinflation

Occurs when a government excessively prints money to pay off its debts, leading to a rapid decrease in currency value.

Inflation and Value of Money

Inflation leads to a loss of money's value over time; effectively, money is "loose."

Stagflation

Characterized by simultaneous rising unemployment and inflation rates, significantly impacting economic stability.

Demand Pull vs. Cost Push Inflation

Demand pull inflation arises from increased consumer demand, while cost push inflation is a result of rising costs for producers.

Consequences of Stagflation

Economic slowdown occurs as money loses purchasing power, leading to decreased consumer confidence and spending.

Effects of Increased Demand

When demand increases, producers often raise prices to maintain profit margins, directly affecting consumer costs.

Demand Pull Inflation Overview

Results from an overall increase in demand for goods, leading to higher prices as supply struggles to keep up.

High Inflation Indicators

Typically signifies a struggling economy, as wages fail to match the pace of rising prices, eroding purchasing power.

Demand Pull Inflation Scenario

Example: Increased consumer income allows more purchases of cars, resulting in a rise in prices for both cars and related accessories.

Consumer Behavior and Prices

An increase in consumer spending on computers leads to higher prices for computers and related products, reflecting heightened demand.

Description

Explore key concepts related to inflation and stagflation through this set of informative flashcards. Each card provides definitions and insights into hyperinflation, the effects of inflation on money value, and the distinctions between types of inflation. Perfect for students and anyone looking to understand these important economic concepts.