Inflation

• What does inflation refer to?

  A general increase in prices over time
• How is inflation measured?

  Using an index like the CPI
• What does an annual inflation rate of 2% indicate?

  A £1.00 product costs £1.02 now
• How does inflation affect purchasing power?

  It reduces purchasing power of money
• What happens if income does not increase with inflation?

  People are worse off financially
• What was the percentage increase in the national minimum wage from 2010 to 2019?


  25%
• By how much did the price of crisps increase from 2010 to 2019?

  49%
• What is the formula for percentage price change?

  \(\text{Percentage Price Change} = \frac{\text{New Price - Old Price}}{\text{Old Price}} \times 100\)
• What does a higher inflation rate in the UK compared to other countries lead to?

  UK goods become more expensive abroad
• How does inflation affect businesses regarding employee pay?

  Employees may demand pay rises above inflation
• What is a potential consequence of businesses raising prices to compensate for inflation?

  It could lead to further inflation
• What is the effect of high inflation on consumer spending?

  It leads to lower levels of spending
• What happens to demand for UK goods if inflation is higher in the UK?

  Demand for UK goods falls
• What is the definition of demand in a business context?

  A request for something to be sold
• What is the definition of a good in business terms?

  A product that can be touched
• How does inflation impact global businesses?

  It affects their pricing competitiveness
• What could be a long-term effect of sustained high inflation on businesses?

  Increased costs and reduced profitability