Inflation

Cost of inflation	Negative consequences in high levels of inflation -          Loss of purchasing power An increase or decrease in how much consumers can buy with a given amount of money. Consumers lose purchasing power when prices increase, and gain purchasing power when prices decrease. Causes of purchasing power loss include government regulations, inflation and natural and man-made disasters. Causes of purchasing power gain include deflation and technological innovation. -          Effects on saving Inflation discourages saving because money loses its purchasing power -          Effects on interest rates Increase their interest rates in order to keep their real rate they earn positive -          Effects on international competitiveness Their exports will be  less competitive -          Uncertainty Firms are discouraged to invest -          Labour unrest Wages arnt kept up with inflation
Deflation	Persistent fall of average prices in the economy Good and bad Good- improvements in supply side of the economy/ productivety Bad- demand side
Costs of deflation	-          Unemployment Demand is low so they lay of workers -          Effects on investment Firms make less profit or losses so they stop investment and lower confidence -          Cost to debitors Bankruptcies beause they cant pay back their banks
How is inflation measured	Cpi- consumer price index Rpi- retail price index Measure in a group of items Each thing has a weighting http://www.qatarisbooming.com/2012/08/14/consumer-price-index-cpi-july-2012/
Issues involved in the measure of inflation	1.       Not applicable to all people as different families spend differently 2.       Errors in the collection of data 3.       Takes time to add or remove items 4.       Different countries have different ways of measuring inflation 5.       Prices may change in such reasons as season 6.       Another system measures price of raw materials
Causes of inflation	Demand pull Cost push Excess monetary growth "There are different kinds of inflation in the world today. Basically, there are four main types which include wage inflation, cost-push inflation, pricing power inflation and secortoral inflation.Wage inflation is also known as demand-pull inflation. Demand-pull inflation is dependent on the demand of goods which changes the price of the product. During war time, this type of inflation may  change dramatically.Cost-push inflation changes when the cost of goods needed for production changes. This in turn drives the cost of goods up. This type of inflation is also affected by increasing costs in labor.Pricing power inflation is also known as administered price inflation. When companies decide to raise the cost of their prices to increase their profits this type of inflation is in play.Sectoral inflation is a more specified inflation that takes place when a certain sector increases prices across the board. One great example of this type of inflation is the oil industry.
Reducing inflation
Calculating inflation
The inglation unemployment trade off debate

A low and stable rate of inflation