• inflation
  • unemployment
  • growth
  • government policies
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  • Created by: Amy Hatch
  • Created on: 18-04-11 19:21


  • what is inflation?
  • define CPI and RPI and explain the difference 
  • name and explain 3 causes of inflation
  • name and explain 2 benefits of inflation
  • name and explain 3 costs of inflation
  • what is hyper-inflation?
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  • inflation is a rise in the general level of prices per annum
  • CPI is a measure of inflation, it is measured by looking at a basket of over 3500 goods, goods like petrol have a high weighting, goods like soap have a low weighting
  • RPI is the same as CPI except it includes a few more goods such as mortgages. CPI is usually used because it is lower
  • demand pull >> AD > AS
  • cost push >> costs of production (eg labour)  rise so prices rise
  • wage spiral >> workers want payrises above the rate of inflation, making inflation worse
  • low stable inflation >> provides incentive for firms to produce, higher AS, more growth
  • borrowers gain >> if money is worth less, borrowers could pay back less in real terms
  • labour market >> workers could strike if they don't get high enough pay rises
  • poor/rich divide >>assets increase in value; rich get richer poor can't afford as much so get poorer so the gap gets wider
  • menu >> time and resources wasted having to change prices frequently
  • hyperinflation >> when inflation is so high a currency becomes worthless
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