econs
- Created by: ZXO
- Created on: 18-04-15 06:08
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- ECONOMICS: Economics Indicators
- RPI/CPI
- Measures average change in prices over a year
- Calculation
- Based on base year (100)
- Weights given based on proportion of income spent
- Weights x Price Index
- Basket of goods
- All added together
- Divided by weights
- Disadvantages
- Effect for specific groups not shown
- Compared to base year
- Some items vary a lot
- Inflation
- Sustained rise in general price level over period of time
- Causes
- Cost-push
- Demand-pull
- Effects
- Unpredictable economy
- Mild inflation can be good
- Value of money decreases
- Low income
- Harder to buy necessities
- Drop in living standard
- Fixed income
- Fall in real income
- Save less
- Spend more
- High income
- Higher proportion spent on necessities
- Save less
- Spend more
- Savers
- Savings lose value
- Businesses
- Supplying goods on credit decreased
- Can't predict future
- Borrowers
- Value of debt decreased
- Benefits
- Deflation
- General fall in price levels over period of time
- Causes
- Fall in demand
- Increase of supply
- Decrease in money supply
- Effects
- RPI/CPI
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