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Inflation & Deflation
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Stagflation
A situation where the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.
Real Interest Rate
The rate of interest an investor, saver or lender receives (or expects to receive) after allowing for inflation.
Deflation
A decrease in the general price level of goods and services, often causing an increase in the value of money.
Nominal Interest Rate
The stated interest rate on a loan or investment, without adjustment for inflation or other factors.
Inflation
A general increase in prices and fall in the purchasing value of money.
Hyperinflation
An extremely high and typically accelerating inflation rate, often exceeding 50% per month.
Wage Spiral
A macroeconomic theory that suggests that rising wages increase disposable income, boosting demand and prices, leading to further wage demands.
Deflationary Spiral
A situation in which lower prices lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in prices.
Demand-Pull Inflation
Occurs when demand for goods and services exceeds their supply.
Inflation Targeting
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.
Consumer Price Index (CPI)
A measure that examines the weighted average of prices of a basket of consumer goods and services, often used as an indicator of inflation.
Quantitative Easing
A monetary policy whereby a central bank buys predefined amounts of government bonds or other financial assets to inject liquidity directly into the economy.
Core Inflation
A measure of the long-term trend in the price level that excludes items with volatile prices, such as food and energy.
Fisher Effect
The economic theory proposed by Irving Fisher that describes the relationship between inflation and both real and nominal interest rates.
Monetary Policy
Actions by a central bank or other regulatory authority to control the money supply and interest rates to stabilize economic growth.
Cost-Push Inflation
When prices rise due to increases in the cost of production and raw materials.
Disinflation
A decrease in the rate of inflation – a slowdown in the rate at which prices increase.
Basket of Goods
A fixed set of consumer products and services valued on an annual basis to measure inflation in an economy or specific market.
Phillips Curve
An economic concept that shows an inverse relationship between unemployment and inflation within an economy.
Purchasing Power
The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.
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