Inflation Flashcards
1
Q
What are the causes of inflation?
A
- Demand pull = increase in AD
- Cost push = increase production costs as AS shifts left
2
Q
What is the price survey and CPI and its limitations?
A
Price survey = 140 different areas in the UK, 100,000 prices and 700 goods
Weights = greater importance/ most used
CPI = measure targeted by BoE rates setters
Limitations = Excludes items related to housing (RPI)
3
Q
What is inflation?
A
Sustained general rise in prices across an economy
4
Q
What is disinflation?
A
A fall in the rate of inflation but prices are still rising
5
Q
What is deflation?
A
Sustained general fall in prices across an economy
6
Q
How to calculate inflation?
A
- Calculate weight to decimal
- Multiply by % change in price
- Add together
7
Q
What are the effects of inflation?
A
- anticipated inflation
- hyperinflation
- unanticipated inflation
