3.3 - Inflation

Question 1

What is inflation?

Answer 1

Inflation is the sustained increase in the general price level of goods and services in an economy over time.

Question 2

What is living expense?

Answer 2

Living expense refers to the costs associated with daily living, such as groceries, transportation, housing and bills.

Question 3

What happens when inflation increases?

Answer 3

When inflation increases, living expense increases (because goods and service prices increases), and domestic exports (goods and services produced within a country and sold to foreign markets) decreases.

Question 4

What is a statement that can be made about increasing prices?

Answer 4

As prices increase, consumer spending power decreases, leading to the fall of living standards.

Question 5

What helps calculate Inflation and what company compiles it?

Answer 5

CPI (or Consumer Price Index) helps calculate Inflation and is compiled by the ABS (Australian Bureau of Statistics).

Question 6

How is CPI measured?

Answer 6

CPI is measured by calculating the average percentage price increases of a ‘basket’ of consumer items, typically used by Australian households.