Inflation Flashcards
What is hyper-inflation
When the inflation rates exceed 100%
Define inflation
A sustained rise in the average price level
Define inflation rate
The percentage change in the average price level over a period of time - usually one year
What is disinflation
When the average price level is rising but has slowed down
What is deflation
When the average price level is falling over time
How to calculate inflation
The use of index numbers, each month the average price level is calculated and recorded as the consumer prices index (CPI)
How to calculate percentage change not using the base year
New - Old
__________ X 100
Old
What does the CPIH stand for
Consumer price index ( including owner occupied housing costs )
How often is CPIH calculated
Each month
Who is the CPIH calculated by
Office for National Statistics (ONS)
What are the limitations of using the price index to measure inflation
Changes in quality Special offers Substitution effects Changes in the pattern of expenditure Statistical errors
What is the RPI
Retail price index - previous measure, to which most attention was paid by the media, wage-bargainers, and business people
What are the similarities of CPI and RPI
Price collection
Fixed basket approach
Weights
What are the main difference between the CPI and the RPI
Population base
Commodity average
Index methodology
