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Macroeconomics Ch.6
Definitions for "Principles of Macroeconomics 3rd Canadian Edition"
| Question | Answer |
|---|---|
| Relative Price | the price of a specific good or service in comparison to the prices of other things |
| Fisher Effect | the tendency for nominal interest rates to be high when inflation is high and low when inflation is low |
| Stable Inflation | when the inflation rate tays roughly constant from one year to the next |
| Zero Inflation | When the price level stays roughly constant |
| Disinflation | When the inflation rate falls from one year to the next |
| Accelerating Inflation | when the inflation rate rises from one year to the next |
| Moderate Inflation | typically means inflation between 3 and 6 % per year |
| Low Inflation | typically means inflation between 1 and 3 % per year |
| Hyperinflation | typically means inflation 500 % per year |
| High Inflation | typically means inflation greater than 6 % per year |
| Downward Nominal Wage Rigidity Hypothesis | the claim that low levels of inflation will reduce efficiency because real wage cuts will then typically require nominal wage cuts which will be resisted |
| Price Signal Distortion Hypothesis | the claim that substantial amount of change in the price level will make it difficult for market participants to interpret the extent to which price changes involve relative price changes |
| Zero-bound on Nominal Interest Rates Hypothesis | the claim that because interest rates cannot go below zero a central bank may be unable to stimulate the economy |
| Consumer Price Index (CPI) | for any period, measures the cost in that period of a standard basket of goods and services in a base year |
| Price Level | the overall level of prices at a point in time as measured by a price index such as CPI |
| Rate of Inflation | the annual % rate of change in the price level as measured by CPI |
| Price Index | ameasure of the average price of a given class of goods or services relative to the price of the same goods and services in the base year |
| Nominal Quantity | a quantity that is measured in terms of its current dollar value |
| Deflation | a situation in which the prices of most goods are falling over time so inflation is negativem |
| Deflating (a nominal quantity) | the process of dividing a nominal quantity by a price index |
| Real Quantity | a quantity that is measured in constant dollar terms |
| Real Wage | the wage paid to workers measured in terms of real purchasing power |
| Nominal Interest Rate | type of interest rate you usually encounter in everyday life |
| Indexing | the practice of increasing a nominal quantity each period by an amount equal to the % increase in the specified price index |
| Real Interest Rate | the nominal interest rate minus the inflation rate |
| Unanticipated Inflation | when the rate of inflation turns out to be substantially different from what people expected |
| Anticipated Inflation | when the rate of inflation turns out to be roughly what most people expected |
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