Inflation

10%

An AD/AS diagram with SRAS shifting leftward.

Uncertainty, reduced competitiveness, and redistribution of income.

(CPI new - CPI old) ÷ CPI old × 100

It may not reflect the consumption patterns of all households, and it ignores quality changes and substitution effects.

1.5%

A fall in aggregate demand or an increase in aggregate supply.

The average change in the prices of a basket of goods and services typically consumed by households.

Higher wages and increased prices for imported raw materials.

Because it ignores improvements in product quality and consumer substitution.

An AD/AS diagram with AD shifting rightward.

It can make exports more expensive, reducing international competitiveness.

It increases the real value of debt, making it harder for borrowers to repay.

A fall in the rate of inflation, meaning prices are rising more slowly.

Inflation caused by an increase in production costs, such as wages or raw materials.

5%

It erodes the purchasing power of their savings if interest rates are lower than inflation.

A sustained decrease in the general price level of goods and services.

Inflation caused by an increase in aggregate demand.