Inflation

It can make exports more expensive, reducing international competitiveness.

1.5%

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

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

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

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

5%

10%

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

Because it ignores improvements in product quality and consumer substitution.

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

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

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

(CPI new - CPI old) ÷ CPI old × 100

Higher wages and increased prices for imported raw materials.

Uncertainty, reduced competitiveness, and redistribution of income.

An index where each item is given a weight based on its relative importance in consumer spending.

An AD/AS diagram with SRAS shifting leftward.

An AD/AS diagram with AD shifting rightward.