Inflation and Unemployment — full notes
Economics · Macroeconomics - Inflation and Unemployment
Inflation and Unemployment
1. Meaning and measurement of inflation
Inflation is a sustained rise in the general price level, measured using a price index such as the CPI. Worked example: CPI this year 145, last year 130. Inflation rate = (145-130)/130 x 100 = 11.54%.
2. Types and causes of inflation
| Type | Cause |
|---|---|
| Demand-pull | Aggregate demand exceeds productive capacity |
| Cost-push | Rising production costs push firms to raise prices |
| Imported | Higher import prices feed into domestic prices |
| Monetary | Excessive money supply growth |