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What is the basic definition of inflation?
A general increase in prices and the fall in the purchasing value of money.
If you have $10 today and inflation is high, will that $10 buy more or less bread next year?
Less bread
Which group is hurt MOST by unexpected inflation: Savers or Borrowers?
Savers
True or False: Inflation acts like a "hidden tax" on people with fixed incomes.
True
Why might a homeowner with a fixed-rate mortgage actually benefit from inflation?
They pay back their debt with money that is worth less than when they borrowed it.
What is "Purchasing Power"?
The amount of goods or services that one unit of currency can buy.
How does high inflation usually affect social stability?
It increases it (leads to strikes, protests, and unhappiness).
What is "Hyperinflation"?
Extremely rapid or out-of-control inflation (usually over 50% per month)
If a worker gets a 3% raise but inflation is 5%, did their "real" income go up or down?
Down (by 2%).
Which is a "physical asset" that usually protects against inflation:
Real estate
Why does inflation discourage people from putting money in a standard savings account?
Because the interest earned is often lower than the rising cost of living.
Who is usually responsible for trying to control inflation in a country?
The Central bank
If a country has high inflation, are its exports likely to become more expensive or cheaper for other countries?
More expensive
What happens to the "Value of the Dollar" during inflation?
It decreases.
