Inflation

Vocabulary

commodity

a good that is bought and sold in a commercial transaction and is interchangeable with other goods of the same type

Consumer Price Index (CPI)

a measure that examines the weighted average of prices of a basket of goods and services bought by consumers

cost-push inflation

a type of inflation that occurs when the price of the inputs of production increases

CPI bias

a way in which the CPI does not fully take into account the entirety of the economic situation

debt relief

actions taken by the government to partially or fully abolish a debt

deflation

sustained decrease in the general price level of commonly bought goods and services

deflationary spiral

a situation wherein deflation triggers circumstances which cause further deflation: as prices fall, consumers hold off on making purchases as they wait for prices to drop further

demand-pull inflation

a type of inflation that occurs when demand outstrips the supply of goods

finished good

good that has completed all phases of manufacturing but has not yet been sold

hyperinflation

extreme inflation in which prices spiral out of control as supply cannot keep up with demand

income

money or a money-equivalent received through the selling of capital, including land or labor, or through investments; income may also include in-kind compensation from work (like fringe benefits) or government transfers.

inflation

sustained increase in the general price level of commonly bought goods and services

interest rate

cost of borrowing money, expressed as a percentage of the amount borrowed; or, equivalently, the return on savings

new-product bias

tendency to not count new goods as part of a price index

nominal

describes the current given value of something, as opposed to its real value, which is adjusted for inflation

price index

a measure that examines the weighted average of prices of a basket of goods and services

processing stage

the manufacturing phase of a product, when it is between the raw and finished stages

Producer Price Index (PPI)

a measure that examines the weighted average of prices at the producer level

quality bias

the tendency to ignore changes in the quality of products when calculating a price index

real

the nominal value adjusted for inflation

substitution bias

the tendency to buy less expensive options when prices change