Inflation

Question 1

inflation

Answer 1

an increase in prices for most goods over a period of time. Inflation effects all sectors of the economy.

Question 2

Consumer price Index

Answer 2

used to measure inflation focusing on goods and services. only relevant to consumers.

Question 3

Issues of inflation

Answer 3

Uncertainty, time distortion and unfairness

Question 4

Why is inflation uncertain

Answer 4

although inflation seems to rise about 2-3% it varies due to other factors such as covid

Question 5

impact inflation has on consumers

Answer 5

consumers are unsure of the future value of their money so they will either spend quickly or save less. can combat with investing not saving.

Question 6

impact inflation has on banks

Answer 6

because people are saving less banks have3 less to invest so they have to decrease the amount of loans

Question 7

impact inflation has on businesses

Answer 7

businesses have less access to loans and have high interest rate. their costs go up so their prices will rise leading to other businesses following suit.

Question 8

How is inflation a domino effect?

Answer 8

inflation creates uncertainity. as a result people change their spending/saving habits. banks then lend less so businesses dont have access to loans and their costs going up leading to them raising prices. creating a cycle of more inflation

Question 9

How is inflation unfair?

Answer 9

the business to raise their price first will benefit but those with set incomes will have less purchasing power

Question 10

How to reduce inflation?

Answer 10

Banks increase interest rates. People save more and spend less. demand of goods decrease so businesses lower prices.
OR increase international trade.
increase in foreign products increases competition for domestic products forcing them to decrease their prices because foreign prices are lower