Please enable JavaScript.
Coggle requires JavaScript to display documents.
measuring economic growth - Coggle Diagram
measuring economic growth
Inflation
Inflation is the increase in average prices in an economy. Inflation rates shows how much prices have changed, compared to last year. Negative inflation rate means prices have fallen over the year
Inflation rate is the percentage (%) change in prices over a specific time period
Example: the inflation rate for the USA in 2016 was 1.3%. Which means since 2015 to 2016 prices in the USA went up by 1.3%
types of inflation
demand pull inflation
Inflation caused by too much demand in the economy
cost push inflation
Cost-push inflation is a purported type of inflation caused by increases in the cost of important goods or services where no suitable alternative is available
built in inflation
Built-in inflation is a type of inflation that results from past events and persists in the present
Deflation
The opposite of inflation is deflation, or falling prices
Reflation
Reflation is when there is a rise in Gdp after a recession
stagflation
Stagflation
Stagflation is when inflation is rising very high. While the economy is stagnant (not growing)
Hyperinflation
Hyperinflation is a situation in which inflation levels are very high. Inflation rate of 50% per year would be classified as hyperinflation
inflation and deflation
Inflation is a general and continuing rise in prices over a period of time.
Deflation is the fall in average prices, which describe a slowdown in the economy (when aggregate demand is falling
measuring inflation
Government usually measure and monitor the rate of inflation monthly using the consumer price index (CPI)
CPI records the price of about 600 goods and services purchased by over 7000 families
the impact of inflation
prices
The main problem of inflation is that prices are rising. The rise in prices reduces the purchasing power of money. This means that people cannot buy as much with their income
wages/salary
When prices are rising, workers need to increase their wages to compensate for the loss in purchasing power
exports
When inflation is higher at home than in other countries, firms/business will have difficulty in doing export, because the cost of export is high
unemployment
Falling export can also result in unemployment especially for people working in s company which doing export
menu cost
When prices is increasing fast, company will have to update their prices frequently, new brochures will have to be printed, websites updated, and sales staff informed
shoe leather cost
When prices is increasing fast, consumers will have to spend more time looking for the lowest prices or the best value for money
uncertainty
When prices is increasing fast, firms will have difficulty in making long term planning
Most company will postponed or cancel their investment
business and consumer confidence
Inflation will cause consumer and business are more likely to save their money
This will reduce demand which will lower the economic growth rates