inflation
- Created by: Former Member
- Created on: 05-05-14 19:25
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- INFLATION
- DEFINITION
- rising prices over a year, value of the pound falls
- PROBLEMS
- may cause unemployment
- uncertainty- business people wont buy into the economy
- rich dont mind inflation as it is the poor who suffer
- hyperinflation- money becomes worthless
- worsens our balance of payments; exports get cheaper, imports get dearer
- savers lose, borrowers gain
- worsens our balance of payments; exports get cheaper, imports get dearer
- hyperinflation- money becomes worthless
- may cause unemployment
- MESUREMENT
- 2 baskets of 650 items, one from the current year and the other from the year before, they measure the basket of good and compare the prices to calculate inflation.
- CAUSES/TYPES
- cost push inflation- costs increase ; imports cause inflation
- demand pull inflation- government boost demand to lower unemployment
- too much money in the economy (quantitative easing) so money becomes worthless if you print too much money
- demand pull inflation- government boost demand to lower unemployment
- cost push inflation- costs increase ; imports cause inflation
- CURE
- decrease demand using monetary and fiscal polices
- monetary policy; increase interest rates and decrease quantitative easing
- fiscal policy; increase taxes and lower government spending
- decrease demand using monetary and fiscal polices
- DEFINITION
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