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2.3.3 Inflation and deflation

Why does inflation reduce the purchasing power of money?

A
  • Demand-pull: aggregate demand shifts right.
  • Cost-push: short-run aggregate supply shifts left.
B

A higher price level means each pound buys fewer goods and services.

C

They raise firms' production costs, causing firms to increase prices.

D

The quantity theory of money uses Fisher's equation of exchange: MV=PQ\boxed{MV = PQ}MV=PQ​.

2.3.3 Inflation and deflation Flashcards

  1. A Level
  2. /Economics
  3. /2.3.3 Inflation and deflation

Flashcards for AQA A Level Economics 2.3.3 Inflation and deflation, covering the key terms, economic models and case studies you need to recall for Paper 1, Paper 2 and Paper 3. 25 cards, matched to the AQA A Level Economics (7136) specification.