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Measures
Types
Causes
Effects
What is inflation?
Inflation measures how much more expensive a set of goods and services
has become over a certain period, usually a year
CPI
Consumer price index (CPI)
CPI = cost of basket at a given time expressed relative to a base year is the
Suppressed inflation
if state authorities damp or even stop the rise of price level by
administrative means. But, by this way causes of inflation cannot be
removed. Such situation is followed by existence of scarce
commodities, shadow economy etc.
Hidden inflation
if official price indexes do not reflect the price of goods and services
produced by shadow economy.
Types of inflation (quantitative
perspective)
Type R [%]
Creeping < 10 beneficial to sets expectations that prices will
economic continue to rise -> increased
growth demand and drives economic
expansion
Galloping 10 – 100 economy Money loses value quickly, foreign
becomes investors avoid country
unstable
Hyperinflation > 100 out of control prices increase rapidly as a
currency loses its value, barter
Deflation <0 bad for why would you spend your crown
economy today when the expectation is that
it could buy effectively more stuff
tomorrow? -> decreases demand
Nationalization of
farms and
companies
Experienced managers
replaced by loyal politicians
Extensive
decrease of No foreign
productivity investments, lack
of food
Low-cost loans
Tax cutting
A situation that has been often cited of this was the oil crisis of the
1970s, which some economists see as a major cause of the inflation
experienced in the Western world in that decade.
Rising wages
Fiscal and monetary policy – e.g. central banks can affect inflation to a
significant extent through setting interest rates