Inflation Is Measured Using The Consumer Price - 1616 Words

INFLATION Definition: Inflation refers to a sustained increase in the general price level over time as measured by a price index. In Australia inflation is measured using the Consumer Price Index, which summarizes movements in the price of a basket of goods and services, weighted according to their significance for Australian households. Measurement and Current Statistic The two most common measures of inflation are the headline rate and the underlying rate. The headline rate of inflation measures the quarterly or annual rate of change in the CPI and can be a misleading indicator due to its inclusion of goods and services whose prices are affected by one-off factors. For this reason economists prefer to analyze underlying or core inflation. This measure removes the effects of volatile price movements and can be calculated using the trimmed mean or weighted median. Australia’s current inflation rate is 1.3%, and is calculated using the following formula: Inflation Rate (%) = (Current CPI-Previous CPI)/(Previous CPI) x 100/1 Trends and Forecast Australia’s inflation rate has remained within the RBA’s target band of 2-3% for the past two decades, averaging 2.7% between 1994 and 2014, slightly above the OECD average of 2%. The RBA has achieved price stability through the use of monetary policy to control cost-push and demand-pull pressures. Globalization and reduced protectionism have exposed the Australian economy to increased levels of competition, putting downwardShow MoreRelatedUsing A Supply And Demand Framework1439 Words   |  6 Pages) Using a supply and demand framework, examine the impact on the equilibrium price and quantity of a product (or service) of an increase in the number of consumers in the market. Using a supply and demand framework, I will examine the impact on the equilibrium price and quantity of a product (or service) of an increase in the number of consumers in the market. This is due to my basic knowledge of the fact that when consumers demand for a good or service increases, the supplier has to increase theirRead MoreInflation And Explain Different Types Of Inflation Essay718 Words   |  3 PagesDefine inflation and explain different types of inflation What is inflation? Inflation can be described as a steady increase of the total prices of goods and services in the economy. It can’t be measured by an increase in the cost of one product or service; can’t even be measured by looking at several products or services. Inflation is an overall increase in the total price level of the goods and services in the whole economy. Changes in inflation are evaluated by monitoring several differentRead MoreEconomics Is All About The Allocation, Unemployment, Economic Growth And The Value Of The Dollar1487 Words   |  6 Pagesmechanisms such as inflation, unemployment, economic growth and the value of the dollar. It will then compare them historically to the US, UK, China and Japan and interpret their meanings for society as a whole. Inflation What is it? Inflation a sustained increase in the generic level of prices for services and goods. As inflation rates rise, every dollar you own decreases in value. The dollar value doesn’t stay constant when there s inflation. (Anon, 2003. Inflation: What Is Inflation? | InvestopediaRead MoreThe Measure And Cause Inflation929 Words   |  4 PagesMeasure and Cause of Inflation Core inflation is the price change of goods and services minus food and energy. It’s measured by two indexes; CPI, consumer price index and PCE, personal consumption expenditures. 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In contrast, microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their behaviorRead MoreThe Effects Of Inflation On The Economy1572 Words   |  7 Pageswhat exactly inflation is, what its effects on an economy are, and what the root causes of inflation are. Rampant inflation is very damaging to an economy and can have long lasting effects on the country and the World financial markets. Because of gl obalization the world is more interconnected than ever and in turn no economy is fully insulated from disruptions to the global markets. The difference between inflation and hyperinflation is also discussed. As the title states, inflations damaging effectsRead MoreAustralia s Current Economic Growth1390 Words   |  6 Pagesincrease in the real GDP, which implies a rise in a nation’s economic capacity. As such, Australia’s current economic growth rate is 3% (May 2016). Inflation refers to a sustained increase in the general level of prices over a period of time, usually one year. It is measured by the percentage change in the consumer price index (CPI), which encompasses the price of a normal, weighted basket of goods and services purchased by households in the nation. Another economic issue is that of unemployment, whichRead MoreInflation Is The Rate Of Increase For Goods And Services1516 Words   |  7 PagesInflation is the rate of increase in prices for goods and services. A rise in inflation decreases the purchasing power of money, meaning consumers would have to pay more for a product than they would have had to a year earlier. It is widely accepted that there are two types of inflation, demand-pull inflation and cost-push inflation. Demand-pull inflation is triggered by demand surpassing the economy’s ability to produce those goods and services required to satisfy demand. Cost-push inflation occursRead MoreEconomic Indicators Of The Disney Company1401 Words   |  6 PagesCompany will use the following economic indicators: consumer price index; productivity and cost; employment cost index; producer price index; consumer confidence level; Manufacturing and trade inventories and sales and corporate profits. Consumer price index Consumer price index is an economic indicator that is used by Disney to measure the estimation of price changes goods and services. The Disney uses the consumer price index to measure the prices changes of its different products in different countriesRead MoreEconomic Growth Of The Uk Economy1707 Words   |  7 Pagesaccommodative monetary and fiscal policy use. Inflation Inflation is a sustained increase in the general price level, leading to a fall in the purchasing power of money. It is measured in two different ways, through the Retail Price Index (RPI) and the Consumer Price Index (CPI). The difference between the two is that the RPI takes into account different things compared to the CPI, such as housing costs. Currently, inflation was at 0.3% in January, measured by the CPI, with the target level being 2%