Measures Of Economic Performance Flashcards
Definition of inflation
Sustained increase of prices of G/S in an economy
How is inflation measured
CPI
Consumer price index
What is cost push inflation (3)
Supply shift inward
Price increase + output decreases
Rising cost of production force firms to raise prices
Causes of cost push inflation (5)
Strikes - less productive
Businesss tax
Shortage of raw materials
Increase wages = increased costs for firms
Supply side shocks
What is demand pull inflation
Excessive growth in demand compared to supply
Causes of demand pull inflation (5)
Low unemployment = consumer confidence
Reduced tax
Low interest rates = injections = multiplier effect
Hysteria = scared of potential price rise = panic buy
Increased consumer income
Costs of inflation (4)
Show leather
Menu
Psychological + political
Unemployment and growth
What’s shoe leather cost
Shop around to look for best deal = time
Menu cost
Price changes means businesses change labels = cost
Psychological and political costs what
Vote for different party
Unemployment and growth costs
Inflation = increased cost to firms = reduce workforce as wages are firms biggest cost
How is EG measured
GDP:
inflation removed
Output
