What does inflation mean in GCSE?

Inflation is a sustained rise in an economy'sgeneral price level. This means that, on average, the prices of goods and services are going up over time. As the price level rises each pound or dollar buys fewer products. This means the real value or purchasing power of money falls.

What is inflation in GCSE economics?

Inflation refers to a general and sustained increase in prices over time. It is measured using an index close indexA measure or indicator that is used to compare changes in value over time., eg the Consumer Prices Index (CPI), which tracks how the price of a typical basket of items changes over time.

What does inflation mean in simple terms?

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

What is the definition of inflation in the UK?

The change in the price level over the year is the rate of inflation. For example, if CPI inflation is 2%, then a basket that was £100 a year ago would be £102 today. You can use our inflation calculator to see how prices have changed over time. This video requires third-party analytical cookies to play.

What causes inflation in IGCSE?

This is also defined as the increase in price due to aggregate demand exceeding aggregate supply. Demand could rise due to higher incomes, lower taxes etc. The demand curve will shift right, causing an extension in supply and a rise in price.

What is inflation? Economics explained

What is inflation and explain its causes?

Inflation occurs when prices rise in an economy and/or the purchasing power of money loses value. Economists have identified several possible causes for inflation, from rising wages to increased aggregate demand and money supply.

How to calculate inflation rate IGCSE?

What happens when inflation rises?

If you hear the inflation rate is high, that means you can buy less this year than you could last year for the same amount of money, and this reduction in buying power is happening at a higher speed than usual.

What is called inflation?

In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI).

What is inflation bitesize?

Inflation reduces the purchasing power. of money since more money is now needed to buy the same items. High rates of inflation mean that unless income. increases at the same rate, people are worse off. This leads to lower levels of consumer spending and a fall in sales for businesses.

How to explain inflation to a kid?

While there are many ways to define inflation, the simplest is when “too many dollars chase too few goods or services.” What this means is demand for a product or service is much higher than the supply of products or services available.

What is the difference between inflation and deflation?

Inflation is a sustained increase in the price level of goods and services. Disinflation is a decrease in the rate of inflation. Deflation is a sustained decrease in the price level of goods and services.

What is a real life example of inflation?

One of the most straightforward examples of inflation in action can be seen in the price of milk. In 1913, a gallon of milk cost about 36 cents per gallon. One hundred years later, in 2013, a gallon of milk cost $3.53—nearly ten times higher.

What does inflation mean for dummies?

Inflation refers to the general increase in the prices of goods and services in an economy over a certain period of time. This reduces the purchasing power of money, meaning that the same amount of money can buy fewer goods or services than before.

What is inflation in the UK right now?

The main inflation measure is called the Consumer Prices Index (CPI), and the latest figure is published every month. CPI was 3.8% in the year to July 2025, up from 3.6% in the 12 months to June. The July 2025 figure is the highest recorded since January 2024, when the rate was 4.0%.

What is cost push inflation in GCSE economics?

Cost-push inflation is a type of inflation that occurs when the cost of production increases, leading to higher prices for goods and services. This type of inflation can be caused by a variety of factors, such as an increase in the cost of raw materials, a rise in labor costs, or an increase in taxes.

Which is the best definition of inflation?

Inflation occurs when the prices of goods and services increase over a long period of time, causing your purchasing power, or the amount of goods and services you can buy with a single unit of currency, to decrease. In short, inflation means that your money may not be able to buy as much today as it could in the past.

What is the difference between inflation and recession?

Inflation measures how much prices are rising over time. A recession is a period of negative economic growth. Emergency savings may provide a financial buffer in down markets brought by inflation and recessions.

What's the opposite word for inflation?

In economics, when prices drop it's called deflation. Deflation makes money more valuable — prices are lower, so you can buy more with it. But deflation is also what happens to a tire if it runs over a nail.

Is high or low inflation better?

While high inflation is generally considered harmful, some economists believe that a small amount of inflation can help drive economic growth.

What are the three main causes of inflation?

Who loses from inflation?

Who Wins, Who Loses from Inflation? If the effects of inflation on income from capital, as well as on wages and salaries, are considered, then those in the upper income brackets are shown to be the heaviest losers.

What are the consequences of inflation?

This is inflation's primary and most pervasive effect. An overall rise in prices over time reduces the purchasing power of consumers because a fixed amount of money will afford progressively less consumption. Consumers lose purchasing power regardless of whether the inflation rate is 2% or 4%.

How do I figure out inflation?

You will subtract the starting price (A) from the ending price (B) and divide it by the starting price (A). Then multiply the result by 100 to get the inflation rate percentage.

What is the formula for inflation in terms of GDP?

The GDP deflator measures inflation by adjusting nominal GDP to reflect real economic growth, excluding price level changes. Ans. It is calculated using the formula: (Nominal GDP ÷ Real GDP) × 100.