Macroeconomic issues (Inflation) Flashcards
(19 cards)
inflation is defined as…
sustained increase in GPL of an economy
2 types of inflation are …
DPI
CPI
Demand pull inflation is cause by
an increase in AD given the constraints of AS assuming economy is nearing full employment
when is DPI occuring
when the economy reaches near full employment
CPI is caused by…
rising production costs
why does rise in COP cause CPI
COP rise = profit fall
firms respond by cutting back on output
CPI is a _______ shift in AS
upward
deflation is defined as..
the sustained decrease in GPL of an economy
deflation is caused by…
- persistent fall in AD
- rise in AS
“bad deflation” is aka
short period deflation as it is associated with recession, falling incomes and output and cyclical unemployment
“good deflation” is aka
increase in productive capacity since real GDP and employment rises
consequence of anticipated + low rate of inflation
ON CONSUMERS
good
workers are able to factor in effect of inflation, this leads to rise in purchasing power and SOL increase
consequence of unanticipated high rate of inflation
ON CONSUMERS
fixed income earners are eroded by inflation
people who save money are worse off
consequence of anticipated low rate of inflation
ON FIRMS
since real profit for producers would rise overtime, firms would increase I and employment
consequence of unanticipated high rate of inflation
ON FIRMS
uncertainties during inflation causes long term planning difficult
budget becomes difficult and thus fall in I
consequence of deflation if due to RISE IN AS
everyone gains as real value of their income/holdings increases
boost in confidence and increase in C and thus SOL rises
consequence of deflation if due to FALL IN AD
deflationary spiral, discouraged spending causes a continuous postpone of making purchases
causes a fall in C & I and further fall in AD
singapore inflation rate is ______ at _______ in 2025
low, 0.9%
myanmar inflation rate is _______ at __________ in 2025
high, 29.3%
