Principles of Finance · free preview
A Century of Inflation
Inflation is the sustained rise in the general price level, measured by consumer price indexes, and its century-long record shows slow erosion in peacetime, sharp spikes in war and oil shocks, and a modern era of anchored expectations around two percent.
1. Measuring the price level
Measuring the price level
2. The century's pattern
The century's pattern
3. Inflation and the course's models
Inflation and the course's models
4. The modern anchor and its tests
The modern anchor and its tests
5. Defining inflation
Which of the following statements best defines inflation as the term is used in this course?
6. Real versus nominal
An investment returns 6 percent while inflation runs 4 percent. Approximately what is the real return?
7. The 1970s lesson
What did the high inflation of the 1970s teach holders of long-term fixed-rate bonds?
8. The Great Disinflation
Why did the fall of inflation after the early 1980s produce a great bull market in bonds?
9. Stocks as long-run inflation hedges
Why are stocks considered a hedge against inflation over long horizons, despite short-run struggles?
10. The matching rule in valuation
What is the correct pairing of cash flows and discount rates in a DCF?
11. The index's initials
What three-letter abbreviation names the US consumer price index? Write the abbreviation.
12. The 1970s price shock
What two-word commodity shock of the 1970s, quadrupling oil prices, fed the decade's great inflation? Answer in lowercase.
13. The central bank's prize
What two-word term names the public's belief that the central bank will keep inflation near target, partly self-fulfilling? Answer in lowercase.
14. The post-1980 era's name
What two-word term names the era of falling inflation from the early 1980s onward? Answer in lowercase.
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