This is a sample of our (approximately) 5 page long Inflation notes, which we sell as part of the Macroeconomics Notes collection, a A package written at Wallington High School For Girls in 2011 that contains (approximately) 18 pages of notes across 5 different documents.
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The following is a plain text extract of the PDF sample above, taken from our Macroeconomics Notes. This text version has had its formatting removed so pay attention to its contents alone rather than its presentation. The version you download will have its original formatting intact and so will be much prettier to look at.
MEASURE OF ECONOMIC PERFORMANCE ii.) INFLATION A sustained increase in the general price level (prices of products across the economy) in a given time period. OR A sustained fall in the purchasing power of money. DISINFLATION - inflation continues at a slower rate DEFLATION - sustained decrease in the general price level in a given time period
1. Consumer Price Index (CPI) - calculated since 1995; took over as the main measure in 2003
- CPI + 2% = Bank of England inflation Target
2. Retail Price Index (RPI) - calculated since 1947; still used for the purpose of indexation of pensions, benefits and tax allowances Index Construction
• Both indices represent the changes in prices across a wide range of consumer purchases.
• They are like the contents of two enormous shopping baskets.
• Each month 120,000 prices for over 650 items from 150 UK locations are collected to update the indices.
A weight is given to each item in the baskets to reflect its importance in the 'typical household budget'
Inflation Rate: A measure of the percentage change in the index compared to the same month one year previously. OR A measure of the annual percentage change in the level of consumer prices.
Curves Showing Inflation:
Aggregate Demand (AD) + Aggregate Supply (AS) Curves The Phillips Curve - a combination curve of inflation + unemployment
Causes of Inflation:
1. DEMAND PULL = increases in AD when the economy is operating at or close to full capacity
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