Learning objectives
Define inflation, deflation and disinflation and explain why a falling inflation rate does not mean falling prices
Explain how a consumer price index is built from a weighted basket, calculate inflation rates from index numbers and outline the difficulties of measuring price changes
Distinguish money (nominal) values from real values and calculate real values such as the real interest rate
Analyse demand-pull and cost-push inflation with AD/AS diagrams
Analyse the consequences of inflation for households, savers, borrowers, firms, the government and international competitiveness
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