Slides in this set
What is Inflation?
· Inflation: Inflation is the increase in the
general level of prices eroding the value of
How do we measure inflation?
CPI- a weighted vale of a typical basket of goods
minus housing costs.
RPI- a weighted value of a typical basket of
Types of Inflation
· Demand pull inflation- too much money
chasing too few goods.
· Cost push inflation- when the price of labour
and raw materials rise. This is often passed
onto the customer in the shape of price rises.
· Imported inflation- when the price of raw
materials abroad goes up affecting the price of
products on our shelves…read more
· Shoe leather cost: a phrase that refers to the cost of time spent and
distance covered in order to find a good deal.
· Menu costs: the inconvenience for companies to constantly change
prices in relation to advertisement
· Uncertainty costs: the cost associated with the drop in investments
as a result of uncertainty in the market meaning people are less
likely to invest.
· Competitiveness: Inflation causes our exports to become less
competitive which in turn less money will come into our
· Borrowers Benefit: when an amount of borrowed money is spent a
certain amount of material goods can be bought with this money
however if then Inflation increases significantly when the money is
paid back a lower amount of material goods can be bought with the
same amount.…read more
Extra Inflation Information
· What is the ideal?- The ideal rate of inflation actually around
2% as this signifies our economy is growing as it means that
demand for goods are increasing.
· BRIC Countries It is often the case today that a significant
amount of raw materials are taken up by the BRIC countries or
the big developing countries f the world these are Brazil
Russia India and China…read more