Readers Question: Does inflation causes unemployment? There are a few different scenarios where inflation can cause unemployment. However, there is not a direct link. Often we will notice a trade-off between inflation and unemployment – e.g. in a period of strong economic growth and falling unemployment; we see a rise in inflation – see Phillips …
Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand. It occurs when economic growth is too fast. If aggregate demand (AD) rises faster than productive capacity (LRAS), then firms will respond by putting up prices, creating inflation. Inflation – a sustained increase in the price level. Demand-pull inflation – …
Inflation means a sustained increase in the general price level. The main two types of inflation are Demand-pull inflation – this occurs when the economy grows quickly and starts to ‘overheat’ – Aggregate demand (AD) will be increasing faster than aggregate supply (LRAS). Cost-push inflation – this occurs when there is a rise in the …
Inflation is a measure of changes in the cost of living. It is calculated by using statistics such as Consumer Price index CPI, retail price index RPI. However, the official inflation rate doesn’t include every price and some consumers may experience different inflation rates. For example, if the price of basic food items increases 50%, …
The fundamental economic problem is the issue of scarcity but unlimited wants. Scarcity implies there is only a limited quantity of resources, e.g. finite fossil fuels. Because of scarcity, there is a constant opportunity cost – if you use resources to consume one good, you cannot consume another. Therefore, an underlying feature of economics is …
Inflation, in the UK, is calculated through measuring changes in the cost of living. The official method is the CPI – Consumer Price Index. CPI Measures the annual % change in price level. Steps for Calculating Inflation Firstly, the government (through ONS) undertake the Family Expenditure Survey (FES). The FES is a voluntary survey of …
In a recession, you would usually expect a fall in the inflation rate due to lower demand and lower economic activity. The inflation rate fell in major recessions like 1929-32, 1981, 1991 and 2020.. However, it is not guaranteed inflation will fall in recession. For example, we could have a period of stagflation – rising …
Originally published in March 2015. Current inflation rate (Feb 2020) is 1.3%. I was 0.7% out. But there was no skill in predicting inflation of 2%. If Ii had to predict inflation for 2025, I would predict the same = 2%. Reader’s Question: What will be the inflation rate in 2020? Firstly, I can’t resist …