Inflation

juliasutton
Mind Map by juliasutton, updated more than 1 year ago
juliasutton
Created by juliasutton over 5 years ago
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A-Level Economics (Unit 2) Mind Map on Inflation, created by juliasutton on 11/26/2014.
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Inflation
1 The rise in the general level of prices, sustained overtime
2 HyperInflcation
2.1 Zimbabwe
2.1.1 2008
2.1.2 inflation reached 150 000%
2.2 where costs of inflation are felt most
3 Demand Pull
3.1 Factor that causes inflation
3.2 too much many chasing too few goods
3.2.1 increase in aggregate demand
3.2.2 e.g. larger population demands more food, there is not enough so prices go up
3.3 Triggered by consumers
4 Cost Push
4.1 when it becomes too expensive for firms to supply their goods and services
4.1.1 can be caued by an increase in price of raw materials
4.2 Factor that causes inflation
4.3 Triggered by suppliers
5 Deflation
5.1 Decreasing nominal prices for goods and services
6 CPI
6.1 Consumer Price Index
6.2 measure of general level of prices in the UK
6.3 changes in CPI measure inflation
6.4 index number
6.4.1 shown as a percentage relative to the base year, value of 100
6.4.2 1996
6.5 'basket of goods'
6.5.1 650 goods and services
6.5.2 prices are collected monthly
6.5.2.1 from 7,000 households
6.5.2.2 and compared with that of a year ago
6.5.3 goods are weighted
6.5.3.1 weights show the proportion of income spent on each item
6.5.3.1.1 reflects spending habits of UK
6.5.4 updated regularly to reflect spending habits of UK
6.5.4.1 if demand for a product goes up or down the survey will pick it up
6.5.4.1.1 either being included or excluded from the basket
6.5.4.2 e.g. in 2013
6.5.4.2.1 champagne re[laced by white rum
6.5.4.3 due to technology updates
6.5.4.3.1 e.g new phones
6.6 doesn't include mortgages or rents
6.7 sceptical?
6.7.1 7,000 households not enough to represent whole population
6.7.2 doesn't include top and bottom 4% of earners
6.7.3 doesn't include pensioners
6.7.4 Doesn't reflect unusual spending habits
7 RPI
7.1 alternative measure of inflation
7.1.1 older
7.2 retail price index
7.3 a measure of the average prices in the UK
7.4 Includes housing costs
8 Interest rates
8.1 raised in a measure to reduce rate of inflation
8.2 if they are cut, it is a sign that inflation is not a threat
8.3 cost of borrowing
8.4 rewards of saving
9 UK inflation
9.1 Target of 2%
9.1.1 achievement of this target is down to Monetary Policy Commitee
9.1.1.1 meet monthly and set base rate of interest rate
9.1.1.2 they fail if inflation is
9.1.1.2.1 above 3%
9.1.1.2.2 below 1%
9.1.2 for stability and control
9.1.3 protects savers
9.1.4 competitive
9.1.5 protects trade
10 Impacts
10.1 prices are forced up rapidly
10.1.1 but wages are not
10.2 people can't afford as much
10.3 decreased trade
10.3.1 countries don't want to trade if your currency is worthless
10.4 benefits those in debt
10.4.1 becomes worthless
10.5 bad for savers
10.5.1 become worthless
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