Jaeck,Randall_M3_A2 - Inflation and Government Economic Policies What is inflation Inflation is an increase in prices for goods and services What are

Jaeck,Randall_M3_A2 - Inflation and Government Economic...

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Inflation and Government Economic Policies What is inflation? Inflation is an increase in prices for goods and services What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian theory and monetary theory, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. Demand-pull, inflation is caused by total demand being more than supply. Cost-push, inflation is caused when manufacturers and businesses raise prices due to shortages in order to balance increases in production costs. With built-in inflation, inflation happens due to prior increases in prices caused by demand-push or cost-pull. And with quantity, inflation is caused by having too much money in the economy Is inflation desirable and what can be done to control inflation in a market economy? When the economy shows stability and has low inflation. Inflation turn out to be desirable when low which is perfect for productive planning and investment. Since the year 2000, the Consumer Price Index has increased. What is the Consumer Price Index (CPI)? Consumer Price Index (CPI) is an index that tracks changes in prices for basic goods and services What have been the causes of these changes? There are several factors that cause a change in CPI, such as the buying habits and trends of the consumer and population shifts.
What is the Producer Price Index (PPI)? This is a system that measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial deal for many products and some services.

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