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Inflation and Deflation

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Demand-Pull Inflation

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Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls.

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Cost-Push Inflation

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Cost-push inflation occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials.

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Inflation Targeting

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Inflation targeting is a monetary policy regime in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public.

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Inflation

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Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

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Wage Inflation

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Wage inflation is the rising general level of wages that occurs when the demand for workers in an economy outpaces the supply of workers.

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Consumer Price Index (CPI)

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The CPI measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.

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Disinflation

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Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the general level of prices, not to be mistaken with deflation.

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Hyperinflation

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Hyperinflation is extremely high and typically accelerating inflation. It quickly erodes the real value of the local currency, as prices rise rapidly.

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Stagflation

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Stagflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.

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Quantitative Easing

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Quantitative easing is a monetary policy whereby a central bank buys government bonds or other financial assets to inject money into the economy to expand economic activity.

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Deflationary Spiral

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A deflationary spiral occurs when reductions in price lead to lower production, which in turn leads to lower wages and demand, which leads to further reductions in price.

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Purchasing Power

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Purchasing power refers to the amount of goods or services that one unit of currency can buy. Inflation erodes purchasing power over time.

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Deflation

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Deflation is the decrease in the general price level of goods and services, often caused by a reduction in the supply of money or credit.

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Monetary Policy

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Monetary policy involves the management of a country's money supply and interest rates by its central bank to control inflation and stabilize currency.

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Asset Inflation

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Asset inflation refers to the tendency of any financial assets like stocks, bonds, real estate, etc., to rise in price over time.

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