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Inflation - Coggle Diagram
Inflation
Consequences of high inflation
Will change relative income and wealth of households
British export goods will become less affordable to foreign countries
This will make imports relatively less expensive
Uncertainty for businesses
Households will spend erratically which will make profitable supply a struggle to gain
Levels of investment decreases
Loss of productive capacity and jobs
Menu costs (price lists) and labels need to be constantly updated
Offers and prices need to be constantly re-negotiated and re-quoted
There will be an opportunity cost for time and effort
Consumers and Firms will struggle to find fair prices
Leads to shopping around which will increase transaction costs
Pressure is put on wages
This creates additional demand
Business costs increase
Even more inflation pressure
Nominal wages rise
Nominal profits rise
Taxes rise for certain people
Deflation
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Disinflation
A persistent decrease in the average price level over a sustained period of time
Price level rises at a decreasing rate
A persistent increase in the average price level over a sustained period of time
Inflation figures are calculated annually
An indicator of the strength of the economy