Inflation

Description

A-Level Economics (Unit 2) Mind Map on Inflation, created by juliasutton on 26/11/2014.
juliasutton
Mind Map by juliasutton, updated more than 1 year ago
juliasutton
Created by juliasutton almost 10 years ago
30
1

Resource summary

Inflation
  1. The rise in the general level of prices, sustained overtime
    1. HyperInflcation
      1. Zimbabwe
        1. 2008
          1. inflation reached 150 000%
          2. where costs of inflation are felt most
          3. Demand Pull
            1. Factor that causes inflation
              1. too much many chasing too few goods
                1. increase in aggregate demand
                  1. e.g. larger population demands more food, there is not enough so prices go up
                  2. Triggered by consumers
                  3. Cost Push
                    1. when it becomes too expensive for firms to supply their goods and services
                      1. can be caued by an increase in price of raw materials
                      2. Factor that causes inflation
                        1. Triggered by suppliers
                        2. Deflation
                          1. Decreasing nominal prices for goods and services
                          2. CPI
                            1. Consumer Price Index
                              1. measure of general level of prices in the UK
                                1. changes in CPI measure inflation
                                  1. index number
                                    1. shown as a percentage relative to the base year, value of 100
                                      1. 1996
                                      2. 'basket of goods'
                                        1. 650 goods and services
                                          1. prices are collected monthly
                                            1. from 7,000 households
                                              1. and compared with that of a year ago
                                              2. goods are weighted
                                                1. weights show the proportion of income spent on each item
                                                  1. reflects spending habits of UK
                                                2. updated regularly to reflect spending habits of UK
                                                  1. if demand for a product goes up or down the survey will pick it up
                                                    1. either being included or excluded from the basket
                                                    2. e.g. in 2013
                                                      1. champagne re[laced by white rum
                                                      2. due to technology updates
                                                        1. e.g new phones
                                                    3. doesn't include mortgages or rents
                                                      1. sceptical?
                                                        1. 7,000 households not enough to represent whole population
                                                          1. doesn't include top and bottom 4% of earners
                                                            1. doesn't include pensioners
                                                              1. Doesn't reflect unusual spending habits
                                                            2. RPI
                                                              1. alternative measure of inflation
                                                                1. older
                                                                2. retail price index
                                                                  1. a measure of the average prices in the UK
                                                                    1. Includes housing costs
                                                                    2. Interest rates
                                                                      1. raised in a measure to reduce rate of inflation
                                                                        1. if they are cut, it is a sign that inflation is not a threat
                                                                          1. cost of borrowing
                                                                            1. rewards of saving
                                                                            2. UK inflation
                                                                              1. Target of 2%
                                                                                1. achievement of this target is down to Monetary Policy Commitee
                                                                                  1. meet monthly and set base rate of interest rate
                                                                                    1. they fail if inflation is
                                                                                      1. above 3%
                                                                                        1. below 1%
                                                                                      2. for stability and control
                                                                                        1. protects savers
                                                                                          1. competitive
                                                                                            1. protects trade
                                                                                          2. Impacts
                                                                                            1. prices are forced up rapidly
                                                                                              1. but wages are not
                                                                                              2. people can't afford as much
                                                                                                1. decreased trade
                                                                                                  1. countries don't want to trade if your currency is worthless
                                                                                                  2. benefits those in debt
                                                                                                    1. becomes worthless
                                                                                                    2. bad for savers
                                                                                                      1. become worthless
                                                                                                    Show full summary Hide full summary

                                                                                                    Similar

                                                                                                    Using GoConqr to study Economics
                                                                                                    Sarah Egan
                                                                                                    Economics
                                                                                                    Emily Fenton
                                                                                                    AN ECONOMIC OVERVIEW OF IRELAND AND THE WORLD 2015/16
                                                                                                    John O'Driscoll
                                                                                                    Economics - unit 1
                                                                                                    Amardeep Kumar
                                                                                                    Using GoConqr to teach Economics
                                                                                                    Sarah Egan
                                                                                                    Functions of Money
                                                                                                    hannahcollins030
                                                                                                    Comparative advantage
                                                                                                    jamesofili
                                                                                                    GCSE - Introduction to Economics
                                                                                                    James Dodd
                                                                                                    Market & Technology Dynamics
                                                                                                    Tris Stindt
                                                                                                    PMP Formulas
                                                                                                    Krunk!
                                                                                                    Aggregate Supply, Macroeconomic Equilibrium, The Economic Cycle, Economic Growth, Circular Flow and Measuring National Income
                                                                                                    Hannah Nad