Inflation
- Created by: EmmaZhou05
- Created on: 13-09-20 10:54
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- Inflation
- definition: A sustained rise in the price level
- CPI (consumer price index)
- 1. Give a wight to each products in the basket(base on how importance each products are/650 products in basket)
- 2.calculate each month
- Evaluation
- 1.Changes in quality
- 2. substitution PED?
- RPI (retail price index)
- calculate the change in the cost of a fixed basket of goods and services.
- headline rate
- RPIX
- same as RPI, but doesn't include mortgage and house costs
- CAUSES
- Demand-pull Inflation
- Anticipate Inflation
- happened when there is an increase in aggregate demand when the economy reached the full employment
- only price increase, without any achievement in economic objective (but also no backward effect)
- Why it will happen
- Government Spending
- depreciation of local currency
- Cost-push Inflation
- aggregate supply of goods and services decreases because of an increase in production costs
- Evil - backward movements of economic objectives.
- Unanticipated Inflation
- why it will happen
- government- increase taxation
- scarcity rescources
- Demand-pull Inflation
- How to solve
- Fiscal/ Monetary Police
- Supple-side Policy
- Deflation
- Good Effect
- Diagram --- positive economic growth
- Bad effect
- Real Value of Debt increase
- signal -- consumer delay their purchase
- Good Effect
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