Inflation is defined as a rise in the general level of prices of goods and services in an economy over time. It is usually measured by the Consumer Price Index (CPI) which tracks changes in prices over time. There are three main theories of inflation: demand-pull inflation which occurs when there is too much spending chasing too few goods, cost-push inflation which is caused by increased costs of production, and inflation's effect on the purchasing power of money as higher prices require more money to purchase the same basket of goods. The effects of inflation include distorting price signals in the economy and causing people to spend less and try to protect themselves from high inflation.
Inflation is defined as a rise in the general level of prices of goods and services in an economy over time. It is usually measured by the Consumer Price Index (CPI) which tracks changes in prices over time. There are three main theories of inflation: demand-pull inflation which occurs when there is too much spending chasing too few goods, cost-push inflation which is caused by increased costs of production, and inflation's effect on the purchasing power of money as higher prices require more money to purchase the same basket of goods. The effects of inflation include distorting price signals in the economy and causing people to spend less and try to protect themselves from high inflation.
Inflation is defined as a rise in the general level of prices of goods and services in an economy over time. It is usually measured by the Consumer Price Index (CPI) which tracks changes in prices over time. There are three main theories of inflation: demand-pull inflation which occurs when there is too much spending chasing too few goods, cost-push inflation which is caused by increased costs of production, and inflation's effect on the purchasing power of money as higher prices require more money to purchase the same basket of goods. The effects of inflation include distorting price signals in the economy and causing people to spend less and try to protect themselves from high inflation.
● Rise in general level of prices of goods and services in an economy over a
period of time ● Inflation is usually measured by the Consumer Price Index (CPI) ● Inflation and deflation ● % increase in cpi = Cpi Current Yr - Cpi Previous/Cpi Previous ● Theories of inflation ○ Demand-pull inflation ■ rise in the general price level resulting from an excess level resulting from an excess of aggregate demand (total spending). Demand-pull inflation is often expressed as ‘too much money chasing too few goods’ ○ Cost-push inflation ■ Rise in the general level of prices resulting from an increase in the cost of production ○ Inflation and the purchasing power of money ■ When inflation occurs, the price levels rise meaning more money are required to buy certain basket of goods ● Effects of inflation ○ Inflation distorts the info delivered by prices ○ People will respond to high and variable rates of inflation by spending less and more time trying to protect themselves from inflation
Fiscal policy ● Concerns gov. Taxes and spending Monetary policy ● Policy only for money ● Mandated by Bangko sentral ng ph