As Economics Inflation

Definitions of key words for inflation

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  • Created by: Vimabi
  • Created on: 27-01-14 18:09
Inflation
Sustained rise in the general price level
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Consumer price index (CPI)
The measure of inflation used for inflation targeting in the UK. It does not include housing costs such as mortgage interest repayments or rent
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Retail price index (RPI)
A measure of inflation. It is also known as the headline rate, and includes housing costs.
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Index number
A number shown relative to another number in percentage terms, so the actual figures are removed and just the relative difference is shown
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Base year
Used for comparison between price levels in different time periods. It is given the number 100.
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Weights
Show the proportion of income spent on items and are used to ensure that the percentage change in price reflects the impact on the average family in terms of their spending.
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Inflation target
In the UK the government tasks the monetary policy committee with the objective of 2% inflation within a range of tolerance of plus or -1%.
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Base rate of interest
The tool used primarily in the UK to control the level of inflation. It is the cost of credit that the central bank set for its immediate financial transactions, and other rates of interest in the economy are based pro rate up against this.
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Ceiling and floor
If inflation goes above 3% (ceiling) all below 1% (floor) then it means that this is off target.
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Card 2

Front

The measure of inflation used for inflation targeting in the UK. It does not include housing costs such as mortgage interest repayments or rent

Back

Consumer price index (CPI)

Card 3

Front

A measure of inflation. It is also known as the headline rate, and includes housing costs.

Back

Preview of the back of card 3

Card 4

Front

A number shown relative to another number in percentage terms, so the actual figures are removed and just the relative difference is shown

Back

Preview of the back of card 4

Card 5

Front

Used for comparison between price levels in different time periods. It is given the number 100.

Back

Preview of the back of card 5
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