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Inflation unit 35 - Coggle Diagram
Inflation unit 35
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The Causes Of Inflation-
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consumer spending may rise excessively. interest rates will be low if consumers are spending large amounts of credit cards
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Demand Pull Inflation: in the market of oil a significant rise in demand for oil with no increase in supply will lead to a rise in the price of oil.
The Cause Of Inflation
wages and salaries account for about 50% of national income hence why wages are normally the single most important change in costs of production.
imports can cause an increase in prices, a boom in the economy will cause a rise in the price of commodities such as oil and coal
cost push inflation- inflation may occur because of changes in the supply side of the economy. occurs because of rising prices
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Definitions
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Hyperinflation- describes a situation where inflation levels are very high, there is no specific number where it becomes hyperinflation, however an annual level of 50% is considered hyperinflation.
Measuring Inflation-
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the changes in the prices of foods is more important than the change in price for tobacco. as more households spend the majority of their income on food.
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The Cost Of Deflation-
with falling prices, consumer confidence tends to be low. consumers are concerned about the future and know if they don't buy today it could be cheaper tomorrow.
another problem is the effect on asset values. Savers can see the real value of their savings grown even if they only receive 1 or 2 % interest.