inflation
- Created by: Share63
- Created on: 27-05-16 07:39
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- Inflation
- Role of RBA
- Adjusts monetary policy
- Influences interest rates via the Cash Rate
- The interest rate charged on the overnight money market to commercial banks
- Raises interest rates to slow down economy and get people to save
- Lowers interest rates to boost economy and get people spending
- The interest rate charged on the overnight money market to commercial banks
- Sets inflation Target to maintain healthy economy
- 2-3%
- Influences interest rates via the Cash Rate
- Adjusts monetary policy
- Causes of increased prices
- 1.Increased Production costs
- 2.Increased cost of imported raw materials and machinery
- Measuring inflation
- Changes in the CPI
- The Consumer Price index
- Measures the prices of a wide range of goods and services of an average household
- The Consumer Price index
- Changes in the CPI
- Definition
- Sustained increase in price levels affects the purchasing power of money
- Effects
- Inflation creates uncertainty
- If Wage rates
- do not keep up with inflation
- decrease in real income and purchasing power
- increase in the cost of living
- decrease in real income and purchasing power
- do not keep up with inflation
- If Wage rates
- Positive Effect some degree of inflation is good for the economy. Rising prices allow companies to grow
- Inflation creates uncertainty
- Role of RBA
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