AQA AS Macroeconomics

Created by: jessica brown
Created on: 31-03-15 19:16

What is inflation and when does it occur?

Inflation is an upward movement in the average level of prices, where the value of money goes down. It occurs when the supply of money goes up, the supply of other goods goes down, demand for money goes down and demand for other goods goes up.

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What is deflation and when does it occur?

Deflation is the downward movement in average level of prices, where the value of money goes up. It occurs when the supply of money goes down, the supply of other goods goes up, the demand for money goes up and the demand for other goods goes down.

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What is cost-push inflation?

Cost push inflation occurs when firms increase prices to maintain or protect profit margins after experiencing a rise in their costs of production.

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What causes cost-push inflation?

Rising imported raw materials, rising labour costs and higher indirect taxes imposed by the government.

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When is cost-push inflation likely?

It’s likely when unemployment is falling to low levels. Shortages of skilled labour will then occur, meaning businesses may have to offer higher pay to attract and retain their best workers when they’re looking to expand their output.

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What is demand pull inflation?

Demand Pull inflation occurs when total demand for goods and services exceeds total supply.

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What causes demand pull inflation?

A depreciation of the exchange rate, a reduction in direct or indirect taxation, rapid growth of the money supply, rising consumer confidence, an increase in the rate of growth of house prices, and faster economic growth in other countries.

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Card 2

Front

What is deflation and when does it occur?

Back

Card 3

Front

What is cost-push inflation?

Back

Card 4

Front

What causes cost-push inflation?

Back

Card 5

Front

When is cost-push inflation likely?

Back

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AQA AS Macroeconomics