inflation

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  • 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
        • Sets inflation Target to maintain healthy economy
          • 2-3%
    • 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
    • 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
      • Positive Effect    some degree of inflation is good for the economy. Rising prices allow companies to grow

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