Inflation 0.0 / 5 ? EconomicsInflation and deflationASEdexcel Created by: Katie PriceCreated on: 23-03-15 17:19 Define inflation a sustained increase in the general price level of the economy 1 of 11 What is the inflation target? 2% 2 of 11 how is inflation calculated? the CPI measure of the price change in the basket of goods 3 of 11 What is the Basket of goods? 650-700 goods and services. not equally weighted. it changes every year 4 of 11 what is cost push inflation? when costs of production increase 5 of 11 What is demand pull inflation? when theres excess AD. 6 of 11 What type of policies reduce demand pull inflation? monetry and fiscal. 7 of 11 How can increased income taxes could reduce inflation? less disposable income = decreased consumer spending = reduced AD 8 of 11 why is high and volatile inflation bad for firms? high menu costs. not internationally competitive 9 of 11 why is high inflation bad for taxpayers wgaes increase but the bands dont change so have to pay more in tax = fiscal drag 10 of 11 why is high inflation bad for thoes on fixed incomes? their living costs increase so they have less money. 11 of 11
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