Economics, Inflation and Stagflation

Use the drop-down menus to complete the statements. Inflation is a measure of how prices decreaseincrease. Disinflation occurred between 2008 and 2009between 2009 and 2010between 2013 and 2014 . The inflation rate was about 1 percent1.5 percent2 percent in 2014. Overall, prices declined between 2010 and 2013between 2014 and 2015in 2009 only .

- Increase - Between 2008 and 2009 - 1.5% - In 2009 only

What are the effects of rapid inflation? Check all that apply.

- Interest rates increase. - Uncertainty increases. - Real income declines.

Which factors would be mentioned in an accurate description of stagflation? Check all that apply.

- a high inflation rate - a high level of unemployment - a low level of production

Which factor caused higher oil prices to directly lead to inflation?

Companies passed on production and transportation costs to consumers.

In 1971, under President Richard Nixon, the federal government passed legislation that "froze" wages and the prices of consumer items. However, that did little to stop the increase in inflation or unemployment. What can you infer was behind Nixon's decision to "freeze" wages and prices?

Inflation affects wages and prices, so freezing those would halt inflation.

Look carefully at this photograph from 1973.The situation illustrated by the sign in this photo was a direct result of an action taken by:

OPEC

Which of these words was first used during the 1970s economic crisis?

stagflation

Inflation and Deflation Introduction: Sort out each description into the category where it fits best.

Inflation - Reduces purchasing power - Causes steadily rising prices - Reduces the value of money Deflation - Causes steadily failing prices - Usually occurs when demand falls - Increases the value of money

When Reagan took office, he brought with him a new economic philosophy. With the guidance of his economic advisors, he tried to stimulate the economy. To do this, his administration cut taxes and invested government money in job-creation programs. It seemed to work. In the eight years that Reagan was president, the unemployment rate fell from 7.5 percent to 5.4 percent. During that same period, inflation dropped from 12.5 percent to 4.4 percent. Which of these economic concerns was related to the achievements described in the passage?

The nation's deficit rose greatly as inflation and unemployment fell.

According to the article, which economic event sparked the decade-long economic crisis?

a sudden increase in oil prices in 1973

Use the drop-down menus to complete the statements. When people have more money and eagerly spend it, this increases supplydemandthe cost of production .This leads tocost-pushdemand-pulldecreased inflation.When the prices of raw materials or labor increase, this causes an increase in supplydemandthe cost of production , resulting in higher prices lower prices increased demand for consumers.

- demand - demand-pull - the cost of production - higher prices