Exercise 8: Inflation

Part I: Definition ofTerms

Direction: Write your answer in the space s provided

1. Inflation
It is a sustained increase in the general price level of goods and services in an economy over
a period of time.

2. Consumer Price Index

It measures changes in the price level of a weighted average market basket of consumer
goods and services purchased by household.

3. Purchasing Power of Money

It is the quantity of goods and services that can be bought with a monetary unit.

4. Core Inflation
It represents the long run trend in the price level.

5. Headline Inflation
It is the measure of the total inflation within an economy, including commodities such as
food and energy prices which tend to be much more volatile and prone to inflationary spikes.

6. Deflation
The action or process of deflating or being deflated.

7. Cost-push inflation
It is the decrease in the aggregate supply of goods and services stemming from an increase
in the cost of production.

8. Full employment
The condition in which virtually all who are able and willing to work are employed.
9. Demand-pull inflation

It is the increase in aggregate demand, categorized by the four sections of the

macroeconomy: households, business, governments, and foreign buyers.

10. Producer price index

It is a price index that measures the average changes in prices received by domestic
produces for their output.

https://en.wikipedia.org/wiki/Inflation
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