Inflation

• Why is RPI usually around 1% higher than CPI?

  Because house prices, rent, and council tax fluctuate faster than other goods.
• What is inflation?


  Inflation is the increase in the prices of the same goods.
• How does inflation affect people's ability to buy goods?

  As inflation increases prices, fewer people can afford to buy goods.
• How is price stability commonly measured?


  By changes in the Consumer Price Index (CPI).
• What is the UK government's inflation target?


  2%.
• What is the opportunity cost of high interest payments on national debt?


  It is money that could be spent on education or hospitals.
• What is inflation?


  A persistent increase in the general price level.
• How are inflation figures typically presented?


  On an annualized basis.
• Why is inflation considered an indicator of economic strength?


  High and unexpected inflation means goods and services become unaffordable.
• How is international competitiveness measured?


  By looking at the value of exports vs the value of imports.
• What is inflation?

  Inflation is a sustained increase in the cost of living or the general price level.
• How does inflation affect purchasing power?

  Inflation leads to a fall in the purchasing power of money.
• How is the rate of inflation measured?

  The rate of inflation is measured by the annual percentage change in consumer prices.
• What is the UK government's inflation target?

  The UK government has set an inflation target of 2% using the consumer price index.
• What is disinflation?

  Disinflation is a fall in the rate of inflation.
• What is deflation?

  Deflation occurs when the general price level falls.
• What is a representative basket of goods and services in CPI?

  A representative basket of goods and services is used with weights attached to each item's importance in people's expenditure.
• How many price quotations are collected each month for CPI?

  Each month, government officials collect 120,000 separate price quotations.
• How does inflation affect lower-income families?

  Inflation has a regressive effect on lower-income families as their wealth in cash becomes less valuable.
• What happens if wages lag behind price increases?

  If wages lag behind price increases, real incomes fall.
• How can high inflation affect interest rates for borrowers?

  High inflation may lead to higher interest rates for consumers with debts.
• What is the impact of high inflation on business confidence?

  High and volatile inflation decreases business confidence and capital investment.
• What is quantity output?

  Quantity output is the quantity of goods and services being produced in an economy.
• What are the limitations of the CPI as a measure of inflation?

  • Not fully representative for non-typical households
  • Different spending patterns among households
  • Changing quality of goods and services
  • New products not reflected in CPI basket