INFLATION Essay

Introduction to Macroeconomics

• Key Lessons Objective

• Distinguish between microeconomics and

macroeconomics

• Determine the broad macroeconomic plan objectives

of governments

• Define the terms inflation, deflation and disinflation

• Explain the calculation in the CPI

• Examine the accuracy in the CPI being a measure of

pumpiing

• Go over the causes and effects of inflation

• Clarify the guidelines for handling inflation

Micro and Macro Economics

• Microeconomics is a branch of economics that

concerns itself with the study and behaviour of

consumers and firms as well as the determination of

market prices and volumes of aspect inputs and

goods and services.

• Macroeconomics handles the study of combination

economic activity. It examines how the economic climate as a

complete works. This deals with elements that identify

national result, employment, the cost level and

total imports and exports

Macroeconomic Policy Objectives

• These are the broad monetary policy final results that

a government looks for to realise in the management

of the economy. They can be:

a. Selling price Stability (Low Inflation)

m. Full Career (Low Unemployment)

c. Economic Growth

d. Healthy Stability of Repayments

e. Salary Redistribution

farrenheit. Concern intended for the Environment

Inflation

Definition:

• Inflation is actually a persistent inclination for the

general level of prices to rise.

• Inflation is a continuous and persistent rise in

in the general/average price level.

• A sustained rise in the average price of goods

and services.

• This is when rates rise in and elevating rate.

Degrees of inflation

• Creeping Pumpiing: it occurs when prices rise

little by little over long periods of time. From(2%-3%)

• Hyperinflation/Galloping pumpiing: this happens

when prices rise uncontrollably. Above(100%)

• Stagflation: this is a period of simultaneous

financial inflation and business economic downturn eg ALL OF US

1979-1981. This kind of when there exists high pumpiing and

dangerous of unemployment.

• Suppressed inflation: this kind of occurs when there is a

trend for the overall price to rise but

government authorities introduce difficult price controls.

Inflation, Disinflation and Decrease

• During inflation, rates are growing at an

increasing rate.

• Disinflation occurs when the rate of increase

in the price level is falling. That is, rates are

increasing at a decreasing price.

• Deflation occurs when the standard price level

is dropping. That is the percentage change in the

CPI can be negative.

Various other inflation conditions

• The Retail Cost Index (RPI)

• This was virtually the only measure offered until

early 80s. The index does not have any units. It is just a set

of numbers that show the regular monthly change in the

(weighted) normal of a 'basket' of goods and

services.

• The inflation figure that you hear in news reports,

therefore , is definitely the annual percentage change in this

index, in the most recent month compared with

the same month in the earlier year. It is usually

referred to as the headline rate of inflation

RPIX

• The 'X' won't actually indicate anything. It's just a label, a bit like the x-axis plus the y-axis in maths. The inflation

level calculated from the RPIX is often called

the underlying rate of inflation.

• This is exactly the same as the RPI except that among the items inside the 'basket' of goods and solutions is taken

out. This item is usually mortgage interest payments. Although

this is a very important part of most households'

monthly spending, the government opt to quote

inflation as the annual difference in RPIX. The reason for

this is the link between the main instrument accustomed to

control pumpiing (for example, interest rates) and the RPI

itself

RPIY

• This measure will take the RPIX one stage further. This kind of

is the same as the RPIX, nevertheless excludes roundabout

taxes as very well. Again, those items that have been

taken away are issues that the federal government can

straight change.

• Others believe rises in indirect taxes cause the

price of a giant proportion with the goods and...



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