Summary
Summary AS Notes Economics Unit 2 Inflation
- Course
- Institution
- Book
AS Notes Economics Unit 2 Inflation Revision Notes
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
A Level Revision Notes Economics Unit 3 Price Discrimination
-
A Level Revision Notes Economics Unit 3 Monopoly
-
A Level Revision Notes Economics Unit 3 Competition
Seller
Follow
mmammadov050
Content preview
Inflationrise in generalprice level in an economy over a period of time lowering the value of
the money causing uncertainty
measured by rise in prices over a period of time through
Consumer Price Index CPI
a measure andservices updated regularly
of average price level ofgoods
measures changes to the price level of basket of goods
price survey approximately 7000 households
ofthe
Components in basket are updated annually
used to compare with other countries in EU
Not totally representative can not take account of every single good
Does not include housing prices
Retail Price Index RPI
older measure of inflation
calculated cost of living and
wage changes
not considered to be official inflation rate by government
more accurate measure of inflation as it includes housing prices
can not compare with other countries in EU
RPI excludes average households excludes top 4
of income earners and lowincomepension
family Expenditure Survey fES
changes in cost of buying a basket of goods
ex emote spending on popcorn
average cost of electricity
in
3 inflation
rising Disinyay
Disinflation reduction in therate of inflation
s
i
2
Deflation
Deflation
fall in generalprice level inan economy over a period
of time increasing the value of
the money
worse than inflation as when prices fall consumers wait for future lower
prices this reduces demand and growth
Moreover business recieve lower profit as prices
of their goods fall so reduce
their investment
Causes
of inflation
two causes
Demand pull inflation AD Ct I 1Gt X M Cost push inflation
occurs when ADshifts to the right occurs when cost of factorof
when consumers confidence rise production goods services rise
increasing spending shitting AS to the left
firms feel more confident when imports increase in price
, I feel m c f l when mp Is increase in p Ce
increasing investment price of raw materials causing
government increases spending firms to 9 prices
higher demand for exports higher wage
price
Level
t productivity 9 averagecosts
As 9 taxes
qPz Priffel n Asa
Pe AS
I 1
I
I 1 AD ADZ qpz t
Real p s
Yi 42 1 I
GDP l l
AD
l 1l
Problem Wage k 41 Real
price spiral e GDP
workers can expect to
get higher wages when Priefein
As
prices rise
although if theirproductivity
remained the same then µre i
wage rise may act as I 1 ADAM
Real
ya k
fuel for furtherinflation one
due to 9disposableincomeMonsumption 9prices
Inflation proskons
Advantages Disadvantages
Debts become relatively
smaller19disposableincome Rising prices
Relative wages can be adjusted Value of money is erodedd livingstandards
government will start monitoring Falling value of savings
the wage so those earning low Reduce international competitiveness
income will have higher rise It wages don't keep up lower
in wage than high income earners real wages
Relative prices can change Creates uncertainty and lowerinvestment
Enables economic growth
during deflation ADD recession
Hyperinflation
where price rises are exceptionally high
price rises of more than 50 a month
Deflation proskons
Advantages
Prices
of goods1services t
Central banks lower interestrates to boost AD
Real income 9
09international competitiveness 9exports ddeficit
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller mmammadov050. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.87. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53022 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now