This is the PowerPoint game in the topic of Inflationary gap and deflationary gap.

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9. QUESTION

10. QUESTION

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13. CHOOSE THE
ANSWERS 
GENERAL INCREASE IN PRICES
AND FALL
IN THE PURCHASING VALUE OF
MONEY
REDUCTION OF GENERAL
LEVEL
OF PRICES IN AN
ECONOMY
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CORRECT ANSWER
RECESSION
STAGFLATION
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19. CHOOSE THE
CORRECT ANSWER
REDUCTION OF GENERAL LEVEL
PRICES IN ECONOMY
a period of temporary
economic decline
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25. • What Is Deflation?
Deflation is a general decline in prices for goods
and services, typically associated with a
contraction in the supply of money and credit in
the economy. During deflation, the purchasing
power of currency rise over the time
• Deflation causes the nominal costs of capital, labor, goods, and services to fall,
though their relative prices may be unchanged. Deflation has been a popular
concern among economists for decades. On its face, deflation benefits
consumers because they can purchase more goods and services with the same
nominal income over time.
However, not everyone wins from lower prices and economists are often
concerned about the consequences of falling prices on various sectors of the
economy, especially in financial matters. In particular, deflation can harm
borrowers, who can be bound to pay their debts in money that is worth more
than the money they borrowed, as well as any financial market participants
who invest or speculate on the prospect of rising prices. HOME

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28. Effects of Inflation
Inflation affects the cost of any goods or services in an economy — including major purchases like homes
and cars; consumer goods like food and televisions; personal services from construction to health care; and
financial services like banking, loans, and credit cards.
Common effects of inflation include:
• Prices Rise.
The most obvious effect of inflation is higher prices on everyday goods and services. That means a higher
cost of living, but also generally higher wages.
• Interest Rates Go Up.
To keep inflation from rising out of control, the Fed typically raises the market interest rate to increase the
cost of borrowing money and keep from pumping too much money into consumers’ hands and spiking
demand and prices.
• Debt Is Cheaper.
If the inflation rate is greater than your interest rate on debt, you benefit by repaying the debt with less-
valuable money. In countries that don’t manage interest rates as the U.S. does, debt becomes cheaper with
inflation, which can accelerate inflation further.
• Saving Is Deterred.
If the inflation rate is higher than the yield on a savings account or the return on investments, consumers
are incentivized to spend now rather than save money that will lose purchasing power over time. Raising
interest rates in the U.S. helps savings keep up with inflation to avoid this dilemma. NEXT
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