Understanding Inflation: Causes and Economic Impacts
The Economic Impacts of Inflation
- Shoe-leather Costs. This refers to the time wasted searching the marketplace for the lowest price. This is much harder when inflation is high.
- Menu Costs. This refers to the costs of inflation to businesses in terms of continually having to change their menus, price tags, and vending machines.
- Redistribution Effects. Periods of high inflation cause redistribution from savers to borrowers. Inflation erodes the real value of all money. Hence, if you are a net saver,
Understanding Inflation: Causes and Measurement
Inflation is a sustained increase in the cost of living or the average/general price level, leading to a fall in the purchasing power of money. The opposite of inflation is deflation, which is a decrease in the cost of living or average price level.
How is the Rate of Inflation Measured?
- The rate of inflation is measured by the annual percentage change in consumer prices.
- The British government has set an inflation target of 2% using the Consumer Price Index (CPI).
- It is the job of the Bank of England
Economic Indicators: GDP, Inflation, and Employment in Chile
Why Real GDP Matters for Measuring Economic Growth
R: Real GDP represents the valuation of all goods and services at constant prices from a base year. Thus, it can determine the actual production of a country and its economic growth.
Calculating Inflation with Nominal GDP
A: Yes, it is possible to measure changes in prices in an economy by measuring all the variations of goods and services produced within a reference period. Therefore, nominal GDP can be used to determine inflation.
Understanding Trend
Read MoreEffective Marketing Strategies: Objectives, Niche, and Product Life Cycle
Marketing Strategy
Marketing Strategy
A firm’s marketing strategy depends on a number of things:
- Its resources
- Their strengths and weaknesses
- Competition
- Skills and assets of the business
- Market opportunities and threats
- Marketing objectives
Marketing Objectives
Marketing Objectives
Marketing objectives are targets that the marketing department wants to achieve. These objectives help businesses achieve their overall objectives. Marketing objectives allow businesses to achieve their marketing strategies.
Examples
Read MoreMarket Entry Strategies: A Detailed Analysis
Market Entry Strategies
Marketing entry strategies are the methods a company chooses to enter a market after setting its target objectives. The choice is influenced by the level of control, risk, and flexibility a company desires. There are three main types:
Export Modes
(Low control, low risk, high flexibility). The most common mode of initial entry into international markets.
1. Indirect Modes
Suitable for a firm with limited international expansion objectives and resources that wants to enter gradually.
Understanding Inflation: Causes, Effects, and Economic Impact
Inflation
Inflation refers to a situation in the economy where there is a general and sustained increase in prices, measured in terms of indices.
Price stability is crucial for governments to achieve all their macroeconomic objectives, so the control of inflation has been their main priority in the past 20 years.
A few important points:
- An increase in a small number of prices does not constitute inflation. The key thing is for the increase to be measured across a wide range of items that affect the