CLEP Macroeconomics

CLEP Macroeconomics covers the principles of macroeconomic theory, including national income, inflation, and fiscal policy.

National Income and GDPUnemploymentInflation
Fiscal PolicyMonetary PolicyAggregate Demand and Supply
Understanding Economic IndicatorsApplying Macroeconomic PolicyGlobalization and Macroeconomics
Mastering Key FormulasActive Practice with Real DataUsing Process of Elimination
National Income and ...UnemploymentInflationFiscal PolicyMonetary PolicyAggregate Demand and...Understanding Econom...Applying Macroeconom...Globalization and Ma...Mastering Key Formul...Active Practice with...Using Process of Eli...
Basic Concepts

Inflation

What Is Inflation?

Inflation is the general increase in prices over time. When inflation is high, each dollar buys less than before, which is called a loss of purchasing power.

Causes of Inflation

  • Demand-Pull Inflation: Too much money chases too few goods (high demand).
  • Cost-Push Inflation: Rising costs of production (like higher oil prices) make goods more expensive.

Measuring Inflation

Economists use price indexes like the Consumer Price Index (CPI) to track inflation. The inflation rate is the percentage change in these indexes over time.

Why Is Inflation Important?

Some inflation is normal and signals a growing economy, but too much can hurt savings and disrupt spending plans.

Quick Tip

Central banks, like the Federal Reserve, often aim for around 2% inflation per year.

Examples

  • If a candy bar cost $1 last year and $1.10 this year, inflation is 10%.

  • Hyperinflation in Zimbabwe once led to prices doubling every day.

In a Nutshell

Inflation means prices are rising, making money less valuable over time.

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Fiscal Policy