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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