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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
    • 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


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