Inflation
●
Rise in general level of prices of goods and services in an economy over a
period of time
● Inflation is usually measured by the Consumer Price Index (CPI)
● Inflation and deflation
● % increase in cpi = Cpi Current Yr - Cpi Previous/Cpi Previous
● Theories of inflation
○ Demand-pull inflation
■ rise in the general price level resulting from an excess level
resulting from an excess of aggregate demand (total spending).
Demand-pull inflation is often expressed as ‘too much money
chasing too few goods’
○ Cost-push inflation
■ Rise in the general level of prices resulting from an increase in the
cost of production
○ Inflation and the purchasing power of money
■ When inflation occurs, the price levels rise meaning more money
are required to buy certain basket of goods
● Effects of inflation
○ Inflation distorts the info delivered by prices
○ People will respond to high and variable rates of inflation by spending
less and more time trying to protect themselves from inflation
Fiscal policy
● Concerns gov. Taxes and spending
Monetary policy
● Policy only for money
● Mandated by Bangko sentral ng ph