Inflation

Question 1

Inflation

Answer 1

A continuous rise in the average prices of all goods over an extended period of time

Question 2

How is inflation measured

Answer 2

The inflation rate is calculated every month by looking at the changes in prices of 700 goods and services in 150 different areas across the UK

Question 3

RPI

Answer 3

Retail price index is the old measure for inflation that includes housing costs.

Question 4

CPI

Answer 4

Consumer price index is the new measure for inflation that doesn’t include housing costs. Uses weighted price index

Question 5

Target

Answer 5

2% plus or minus 1%

Question 6

Inflation explained

Answer 6

When price levels rise, the value of money falls. Money can buy less in real terms as the average cost of general items increases, it costs you more to buy the same goods. It impacts the cost of living and can lead to slower economic growth.

Question 7

Inflation rate

Answer 7

(CPI t - CPI t-1)/(CPI t-1) x100
Where CPI: Consumer price index
t= current (or latest) time period (e.g. 2021)
t-1= refers to the previous time period before the current time period (e.g. 2020)

Question 8

Deflation

Answer 8

Continuing fall in the average (nominal) price level, negative inflation

Question 9

Disinflation

Answer 9

Rate of inflation is decreasing . Inflation is positive but in increasing at a decreased or slower rate

Question 10

Hyperinflation

Answer 10

“Out of control” or drastic price increases, often linked to money supply issues (any inflation of 100%+)