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Inflation (Combating Inflation (Deflationary policies (a reduction in…
Inflation
Combating Inflation
Deflationary policies
a reduction in government spending, tax increases
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Measuring Inflation
CPI
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excludes house purchases, charity contributions and gambling
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Causes of Inflation
Keyensian
a. Demand Pull: where aggregate demand is greater than aggregate supply, suppliers respond to surplus demand by increasing prices
b. Cost Push: Price level of goods is pushed up by an increase in the cost of the factors of production. i.e. wage increases, import prices
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