Money and Inflation Quick Check
1. Define inflation: Inflation is the rate at which the general level of prices for goods and services is rising, resulting in a decrease in the purchasing power of a currency.
2. What causes inflation? Inflation can be caused by various factors, including an increase in the money supply, increased demand for goods and services, rising production costs, or changes in government policies.
3. What are the effects of inflation? Inflation can have both positive and negative effects. Some positive effects include a boost in economic growth and increased investment. However, negative effects include a decrease in purchasing power, reduced standard of living, uncertainty for businesses, and the erosion of savings.
4. How is inflation measured? Inflation is commonly measured using the Consumer Price Index (CPI), which tracks changes in the prices of a basket of goods and services commonly purchased by households.
5. How can inflation be controlled? Central banks and governments can implement various monetary and fiscal policies to control inflation. These can include adjusting interest rates, increasing or decreasing the money supply, implementing tax policies, and implementing regulations on prices and wages.