Inflation

Inflation

General rise in prices in the economy
1. For example when sometimes products like food are too expensive
2. It's given by percents
  1. It isn't always bad
    1. But after a 5% rise business should prepare
Causes
1. Demand pull- inflation
  1. Too much people want to buy
    1. But companies don't have the capacity
      1. Prices increase
2. Cost-push -inflation
  1. When companies spend too much on production
    1. They have to rise their prices to keep profit margins
  2. Wage-price spirals and expectations
Effects on businesses
1. Increased costs
  1. Uncertainty
    1. Consumer reactions
      1. International competitivness
Deflation
1. Effects
  1. Reducing costs
  2. Stagnant economy
How is it measured
1. 1) Representative products are put together as a "market basket"
2. 2)The price of this total basket is compred over time
3. 3) This result in an index % of the amount the prices have changed

Resource summary

	Created by Dani Videa about 9 years ago