Exercise 8: Inflation

Part I: Definition ofTerms

Direction: Write your answer in the space s provided

1. Inflation
It is a sustained increase in the general price level of goods and services in an economy over
a period of time.

2. Consumer Price Index

It measures changes in the price level of a weighted average market basket of consumer
goods and services purchased by household.

3. Purchasing Power of Money

It is the quantity of goods and services that can be bought with a monetary unit.

4. Core Inflation
It represents the long run trend in the price level.

5. Headline Inflation
It is the measure of the total inflation within an economy, including commodities such as
food and energy prices which tend to be much more volatile and prone to inflationary spikes.

6. Deflation
The action or process of deflating or being deflated.

7. Cost-push inflation
It is the decrease in the aggregate supply of goods and services stemming from an increase
in the cost of production.

8. Full employment
The condition in which virtually all who are able and willing to work are employed.
9. Demand-pull inflation

It is the increase in aggregate demand, categorized by the four sections of the

macroeconomy: households, business, governments, and foreign buyers.

10. Producer price index

It is a price index that measures the average changes in prices received by domestic
produces for their output.

https://en.wikipedia.org/wiki/Inflationwww.insee.fr
debitoor.com
www.investopedia.com 
Part 2: Essay

Direction: Answer the following questions briefly but thoroughly

1. What are the positive and negative effects of inflation to the Philippine economy?

Inflation is not good for the economy because it is the main reason why all products’ costs
increase. If there is a positive effect of inflation, it is it prevent the deflayion.

2. Briefly discuss the difference between cost push and demand pull inflation

Demand-pull inflation is the increase in aggregate demand, categorized by the four sections
of the macroeconomy: households, business, governments, and foreign buyers. On the other
hand, Cost-push inflation is the decrease in the aggregate supply of goods and services
stemming from an increase in the cost of production.
 Exercise 9: Fiscal Policy

Direction: Answer the following questions briefly but thoroughly. Write your answer in the
space provided.

1. How does fiscal policy reflect on our government system? Explain.

Our government system became the pattern of our fiscal policy. We are a Democratic
country that is why the every decision regarding our fiscal policy is all for the good of the
citizens.

2. In your own understanding, explain briefly fiscal policy and the crowding-out effect.
For me fiscal policy is the policy use by the government to stabilize the financial aspect of
the country. While crowding-out effect is the involvement of the government in the market
economy which have a huge effect on the supply and demand.