What happens when inflation rises faster than expected?

unanticipated inflation when the price level increases at a faster pace than expected; for example, if you think that the rate of inflation will be 5%, but it turns out to be 8%.

What happens when the money supply increases rapidly?

To summarize, the money supply is important because if the money supply grows at a faster rate than the economy’s ability to produce goods and services, then inflation will result. Also, a money supply that does not grow fast enough can lead to decreases in production, leading to increases in unemployment.

What is it called when prices are rapidly increasing?

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

What causes hyperinflation?

The two primary causes of hyperinflation are (1) an increase in money supply not supported by economic growth, which increases inflation, and (2) a demand-pull inflation, in which demand outstrips supply. These two causes are clearly linked since both overload the demand side of the supply/demand equation.

How does inflation cause redistribution of income and wealth?

III. EFFECTS OF INFLATION. The Redistribution of Income and Wealth 1. Unanticipated inflation, inflation that is not expected, will redistribute income and wealth. a. Redistribution of income occurs because some wages and salaries increase more rapidly than the price level while other wages and salaries increase more slowly than the price level.

Why is income inequality higher in high productivity growth industries?

The difference in deflators was the stronger effect among high productivity growth industries, while the change in labor’s share of income was the stronger effect among most other industries.

Why did income inequality increase in the United States?

It wasn’t until 2006 that the US imported more manufactured goods from low-wage (developing) countries than from high-wage (advanced) economies. Inequality increased during the 2000–2010 decade not because of stagnating wages for less-skilled workers, but because of accelerating incomes of the top 0.1%.

What makes a nation’s GDP per capita increase?

A For a nation’s real GDP per capita to rise during a year: A. consumption spending must increase. B. real GDP must increase more rapidly than population. C. population must increase more rapidly than real GDP. D. investment spending must increase. B Growth is advantageous to a nation because it: A. promotes faster population growth.