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20 Cards in this Set
- Front
- Back
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INFLATION |
An increase in the average level of prices of goods and services. An increase in the average level of prices, not a change in any specific price. |
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DEFLATION |
A decrease in the average level of prices of goods and services. |
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RELATIVE PRICE |
The price of one good in comparison with the price of other goods. |
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NOMINAL INCOME |
The amount of money income received in a given time period, measured in current dollars. |
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REAL INCOME |
Income in constant dollars; nominal income adjusted for inflation. |
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MONEY ILLUSION |
The use of nominal dollars rather than real dollars to gauge changes in one's income or wealth. |
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HYPERINFLATION |
Inflation rate in excess of 200 percent, lasting at least one year. |
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BRACKET CREEP |
The movement of taxpayers into higher tax brackets (rates) as nominal incomes grow. |
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CONSUMER PRICE INDEX (CPI) |
A measure (index) of changes in the average price of consumer goods and services. |
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INFLATION RATE |
The annual percentage rate of increase in the average price level. |
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BASE YEAR |
The time year used for comparative analysis: the basis for indexing (for example, of price changes). |
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ITEM WEIGHT |
The percentage of total expenditure spent on a specific product; used to compute inflation indexes. |
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CORE INFLATION RATE |
Changes in the CPI excluding flood and energy prices. |
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GDP DEFLATOR |
A price index that refers to all goods and services included in GDP. Not limited to a fixed "basket of goods and services". Not a pure measure of price changes since its value reflects both price changes and market responses. Usually registers a lower inflation rate than the CPI. |
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NOMINAL GDP |
The value of final output produced in a given period, measured in the prices of that period (current prices). |
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REAL GDP |
The value of final output produced in a given period, adjusted for changing prices. Formula: Real GDP=Nominal GDP/GDP Predictor X100. Changes in GDP are a good measure of how output and living standards are changing. Nominal GDP Statistics, by contrast, mix up output and price changes. |
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PRICE STABILITY |
The absence of significant changes in the average price level; officially defined as a rate of inflation of less than 3 percent. |
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COST-OF-LIVING ADJUSTMENT (COLA) |
Automatic adjustments of nominal income to the rate of inflation. |
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REAL INTEREST RATE |
The nominal interest rate minus the anticipated inflation rate. |
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ADJUSTABLE-RATE MORTGAGE (ARM) |
A mortgage (home loan) that adjusts the nominal interest rate to changing rates of inflation. |
