Inflation

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  • Created by: WJS2104
  • Created on: 12-04-14 16:12
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  • Inflation
    • Target 2%
      • low and stable rate
      • Measured using CPI and RPI
    • Currently 1.7%
      • Measured using CPI and RPI
    • Demand pull
      • When demand is greater than supply
      • Causes: Exchange rate depreciation or consumer confidence increased
    • Cost Push
      • When prices of goods and services increase
      • Causes: raw material cost increasing or rising labour costs
    • Controlling inflation
      • MP : BoE setting interest rates (bank rates)
        • High : encourage saving
        • Low : Encourage saving
      • FP : higher direct taxes and less government spending
        • These redice injections into the circular flow stopping demand pull
          • Demand pull
            • When demand is greater than supply
            • Causes: Exchange rate depreciation or consumer confidence increased
      • Supply Side : Seeking to increase productivity
        • Controlling labour costs to stop cost push
      • Labour Market : Less trade union power and more flexy hours
        • Controlling labour costs to stop cost push
    • Definition
      • Sustained increase the cost of living

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