Inflation and Stagflation Flashcards

What can cause hyperinflation?

Inflation causes money to BLANK its value over time.

What led to a period of stagflation?

How does demand pull inflation differ from cost push inflation?

What is one consequence of stagflation?

What is the direct effect when demand increases?

What happens when demand for goods increases?

Typically, high inflation is a sign of?

Which scenario is an example of demand pull inflation?

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

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.

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.