MacroeconomicsLesson 1 of 2 in the course Inflation

Inflation Across U.S. History and International Economies

5 flashcards · 5 quiz questions · 5 match pairs · 4 fill-in sentences · English

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Summary

This lesson examines how inflation and deflation have changed the U.S. price level over time. It also explains how economic downturns and periods of rapid growth often relate to changes in inflation.

The Consumer Price Index (CPI) tracks the cost to the average consumer of acquiring a basket of goods and services. The basket may be fixed or adjusted at specified intervals. The annual inflation rate is the percentage change in the CPI from one year to the next.

All flashcards

Consumer Price Index (CPI)
An index that tracks the cost to consumers of acquiring a basket of goods and services.
Inflation rate
The percentage change in the CPI from one year to the next.
Price ceiling
A legal maximum price; if set below the market-clearing level, it can cause a shortage.
Deflation
A fall in the general price level, which increases the buying power of money.
Hyperinflation
An exceptionally severe outburst of inflation that can greatly erode money’s purchasing power.

Quiz questions

  1. How did Japan’s and the United Kingdom’s inflation rates compare in 1975?Answer: Japan’s exceeded 8%, while the United Kingdom’s was almost 25%.
  2. What can happen when a legal price ceiling is set below the market-clearing price?Answer: Quantity demanded can exceed quantity supplied, creating a shortage.
  3. What happened to inflation rates in the United States and Europe during the 1980s?Answer: They declined and largely remained lower afterward.
  4. Which pattern describes Russia’s inflation experience in the material?Answer: It reached 2,500% per year in the early 1990s, then fell below 10% by 2006.
  5. What do Zimbabwe’s 100-trillion-dollar banknotes illustrate?Answer: A high face value does not guarantee substantial purchasing power.

Based on Principles of Economics 3e by Steven A. Greenlaw, David Shapiro, Daniel MacDonald (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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