Government Aims
- Created by: bethsmith99
- Created on: 14-04-16 19:37
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- Aim to prevent overheating
- Too much money chasing too few goods.
- Results in higher prices, businesses know consumers will pay = INFLATION
- Government Aims
- Types of Inflation
- Demand Pull
- Occurs when total demand for goods and services exceeds total supply.
- Happens when there is excessive growth in aggregate demand, and there is an inflationary gap = overheating.
- Occurs when total demand for goods and services exceeds total supply.
- Cost Push
- Occurs when firms increase prices to maintain/protect profit margins after experiencing a rise in their costs of production
- Sources: Rising Labour Costs
- Caused by wage increase > productivity, especially important in industries, which are labour intensive.
- Demand Pull
- CPI
- Based on the HCIP - means inflatoin is internationally agreed standards throughout Europe.
- Types of Inflation
- Too much money chasing too few goods.
- Types of Inflation
- Demand Pull
- Occurs when total demand for goods and services exceeds total supply.
- Happens when there is excessive growth in aggregate demand, and there is an inflationary gap = overheating.
- Occurs when total demand for goods and services exceeds total supply.
- Cost Push
- Occurs when firms increase prices to maintain/protect profit margins after experiencing a rise in their costs of production
- Sources: Rising Labour Costs
- Caused by wage increase > productivity, especially important in industries, which are labour intensive.
- Demand Pull
- CPI measured through basket of goods. Tends to be lower than RPI except when interest rates are cut.
- Does not include Mortgage interest payments, solicitors etc.
- Based on the HCIP - means inflatoin is internationally agreed standards throughout Europe.
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