Inflation
11-1. Definition of Inflation:It is defined as a
continuous increase in general price levels for some set of goods and services
in a given economy over a period of time.
11-2. Measures of inflation: Inflation rates are
calculated for many different indicators, including:
Consumer price indicators (CPIs) which measure the price of a selection
of goods purchased by a "typical consumer."
Cost-of-living indicators (COLI) which often adjust fixed incomes and
contractual incomes based on measures of goods and services price changes.
Producer price indicators (PPIs) which measure the price received by a
producer.
Wholesale price indicators , which measure the price
of a selection of goods at wholesale.
The GDP Deflator is a measure of the price of all the
goods and services included in Gross Domestic Product (GDP).
11-3. Related concepts:
· Elasticity is the ratio of the proportional change in one variable with
respect to proportional change in another variable. disinflation, the reduction of the rate of
inflation;
· hyperinflation, an out-of-control inflationary spiral;
· stagflation, a combination of inflation and rising unemployment.
· reflation,
which is an attempt to raise prices to counteract deflationary pressures.
11-4. types of inflation: There are three major types
of inflation:
11-4.1.Demand pull inflation: inflation from high
demand for goods and low unemployment.
11-4.2.Cost push inflation: inflation caused by sudden
decrease in the supply of goods, which would increase goods prices. Producers
for these goods will increase the costs could then pass this on to consumers in
the form of increased prices.
11-4.3. Anticipated: Prices rise because people expect
them to rise.