inflation (L4)

Question 1

inflation rate

Answer 1

price-old price/old price x100

Question 2

who is inflation important for

Answer 2

households
firms
policy makers

Question 3

demand<production

Answer 3

deflation
unsold inventories = economic temp falls

Question 5

real value/purchasing power

Answer 5

present value/1+inflation rate

Question 6

how can low inflation help redistribute wealth

Answer 6

savers lose out from inflation tax but those who borrow will be better off as the money they’re paying back is worth less, a poorer person is more likely to borrow while the rich are more likely to save

Question 7

what can deflation lead to

Answer 7

falling prices, economic stagnation, they think the money will be worth more later so economy doesn’t run as they spend less

Question 8

measures of uk household inflation

Answer 8

RPI retail prices index
CPI consumer prices index

Question 9

how would you calculate price index

Answer 9

find cost of the basket at base period prices
find cost of basket currently
calculate index current/base year x100

Question 10

GDP deflator

Answer 10

index of prices of all items in GDP
nominal/real x100

Question 11

hyperinflation

Answer 11

inflation is 50% or more per month eg zimbabwe 2008