Chapter 9: Inflation

The effects of inflation are seen in:

goods, services, wages and income levels

In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________.

hyperinflation

Inflation implies that the level of all prices _____________________.

increase

When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.

indexed

A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned

inflation

The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.

inflation rate

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.

the basket of goods

When we want to measure wage inflation in the labor market, we use the:

Employment cost index

An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

GDP Deflator

The ____________________ is based on the prices of merchandise that are exported or imported.

International Product Index

What distinguishes the real value of a statistic from the nominal value of a statistic?

adjusting for inflation

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.

cost of living adjustments

Another term used to describe negative inflation is:

deflation

The situation where the buying power of money in terms of goods and services increases is called:

deflation

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.

ongoing rise

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.

overstate

The Producer Price Index is based on prices paid for supplies and inputs by:

producers of goods and services

Which of the following is an example of one of the major categories in the overall CPI?

recreation

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:

substitution bias

The most commonly cited measure of inflation in the United States is:

the Consumer Price Index (CPI).