INFLATION
Introduction to Macroeconomics
• Key Lesson Objective
• Distinguish between microeconomics and macroeconomics • Identify the broad macroeconomic policy objectives of governments
• Define the terms inflation, deflation and disinflation
• Explain the calculation of the CPI
• Examine the accuracy of the CPI as a measure of inflation • Discuss the causes and effects of inflation
• Explain the policies for controlling inflation
Micro and Macro Economics
• Microeconomics is the branch of economics that concerns itself with the study and behaviour of consumers and firms and the determination of market prices and quantities of factor inputs and goods and services.
• Macroeconomics deals with the study of aggregate economic activity. It analyses how the economy as a whole works. It deals with factors that determine national output, employment, the price level and total imports and exports
Macroeconomic Policy Objectives
• These are the broad economic policy outcomes that a government seeks to realise in the management of an economy. They are:
a. Price Stability (Low Inflation)
b. Full Employment (Low Unemployment)
c. Economic Growth
d. Healthy Balance of Payments
e. Income Redistribution
f. Concern for the Environment
Inflation
Definition:
• Inflation is a persistent tendency for the general level of prices to rise.
• Inflation is a continuous and persistent rise in in the general/average price level.
• A sustained rise in the average price of goods and services.
• This is when prices rise at and increasing rate.
Degrees of inflation
• Creeping Inflation: it occurs when prices rise gradually over long periods of time.From(2%-3%)
• Hyperinflation/Galloping inflation : this occurs when prices rise uncontrollably. Above(100%)
• Stagflation : this is a period of simultaneous economic inflation and business recession eg US
1979-1981.This when there is high inflation and high level of unemployment.
• Suppressed inflation : this occurs when there is a tendency for the
• Key Lesson Objective
• Distinguish between microeconomics and macroeconomics • Identify the broad macroeconomic policy objectives of governments
• Define the terms inflation, deflation and disinflation
• Explain the calculation of the CPI
• Examine the accuracy of the CPI as a measure of inflation • Discuss the causes and effects of inflation
• Explain the policies for controlling inflation
Micro and Macro Economics
• Microeconomics is the branch of economics that concerns itself with the study and behaviour of consumers and firms and the determination of market prices and quantities of factor inputs and goods and services.
• Macroeconomics deals with the study of aggregate economic activity. It analyses how the economy as a whole works. It deals with factors that determine national output, employment, the price level and total imports and exports
Macroeconomic Policy Objectives
• These are the broad economic policy outcomes that a government seeks to realise in the management of an economy. They are:
a. Price Stability (Low Inflation)
b. Full Employment (Low Unemployment)
c. Economic Growth
d. Healthy Balance of Payments
e. Income Redistribution
f. Concern for the Environment
Inflation
Definition:
• Inflation is a persistent tendency for the general level of prices to rise.
• Inflation is a continuous and persistent rise in in the general/average price level.
• A sustained rise in the average price of goods and services.
• This is when prices rise at and increasing rate.
Degrees of inflation
• Creeping Inflation: it occurs when prices rise gradually over long periods of time.From(2%-3%)
• Hyperinflation/Galloping inflation : this occurs when prices rise uncontrollably. Above(100%)
• Stagflation : this is a period of simultaneous economic inflation and business recession eg US
1979-1981.This when there is high inflation and high level of unemployment.
• Suppressed inflation : this occurs when there is a tendency for the