Inflation

• What impact does economic growth have on inflation?

  Economic growth can lead to more jobs and increased demand for goods and services.
• What does economic growth create in terms of consumption?

  It creates more demand for goods and services.
• How does economic growth affect aggregate demand?

  It causes an increase in aggregate demand.
• What factors determine the impact of economic growth on inflation?

  It depends on what is causing the economic growth.
• What happens when economic growth is caused by an increase in aggregate supply (AS)?

  It might be caused by lower oil prices, shifting AS to the right and reducing production costs.
• What is a positive impact of economic growth on government revenue?

  The government receives more tax revenue, allowing for subsidies on green energy.
• How does higher income from economic growth affect consumer behavior?

  Higher income allows consumers to purchase more environmentally friendly products.
• What is a potential negative impact of economic growth on the environment?

  It may cause damage to the environment as factories increase production.
• What is inflation defined as?

  A sustained increase in the price level of an economy over a period of time.
• What is deflation?

  A sustained decrease in the price level of an economy over a period of time.
• What is disinflation?

  A decrease in the rate of inflation.
• How is inflation measured?

  It is calculated using a consumer price index (CPI).
• What does the consumer price index (CPI) measure?

  It measures the change in price of a basket of goods and services consumed by the average household.
• If the CPI in 2012 is 105 and in 2016 is also 105, what does this indicate about inflation during that period?

  It indicates that there was no inflation during that period.
• Why might the CPI not represent all consumers equally?

  Because the basket may represent some consumers more than others, leading to different individual inflation rates.
• How do different income earners experience inflation differently?

  Different income earners may experience a different rate of inflation based on their consumption patterns.
• What factors can affect an individual's inflation rate?

  The quantity of products purchased can affect an individual's inflation rate.