2.1

Question 1

What is inflation ?

Answer 1

• A sustained increase in the general price level of goods end services in an economy.

Question 2

What is deflation?

Answer 2

A sustained decrease in prices of goods end services in an economy.

Question 3

What is disinflation?

Answer 3

• The decrease of inflation rate → inflation still happens but is happening slowly.

Question 4

What is consumer price index (CPI)?

Answer 4

• How inflation is measured → looks roughly at 700 goods and services consumers commonly spend their money.

Question 5

What is inflation rate?

Answer 5

• The percentage rate that the inflation increases.

Question 6

What is inflation rate target?

Answer 6

• The inflation rate that the bank of England wishes to achieve.

Question 7

How to calculate index number?

Answer 7

Data value in year y
——————————- x100
base year value

Year price Index 197, 973
2007 192,651 100.0. —————— x100 = 102.7
2010. 197,973. 102.7. 192,651

Question 8

How to calculate Percentage increase?

Answer 8

Difference
—————x100
Original

Question 9

Circular flow of income ?

Answer 9

Injections: households. Leakages:
- exports. ¡ ! - savings
- investment. Output. ¡ ! F.O.P. - tax
- government spending. Firms. - import savings
expenditure. Income

Question 10

What is gross domestic product (GDP)?

Answer 10

The total value of national output produced in a period of time.

Question 11

What is unemployment?

Answer 11

• The percentage of people who don’t work but are fit to work