Inflation and Deflation: Further Exploration (AQA A-Level Economics): Flashcards
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Practise the cards
10 cards from this deck
Adaptive expectations
Adaptive expectations
Beliefs formed based on past events
Rational expectations
Rational expectations
Expectations using all available information
Year Bank of England gained operational independence
Year Bank of England gained operational independence
1997
UK's inflation target (%)
UK's inflation target (%)
2%
Effect of low, stable inflation on economy
Effect of low, stable inflation on economy
'Greases the wheels' - helps it function smoothly
Deflation vs disinflation
Deflation vs disinflation
Falling prices vs slowing inflation (prices still rising)
Cause of good/benign deflation
Cause of good/benign deflation
Supply-side improvements reducing production costs
Cause of bad/malign deflation
Cause of bad/malign deflation
Collapse of aggregate demand
Shoe leather/search costs
Shoe leather/search costs
Time & effort consumers spend finding best prices
Menu costs
Menu costs
Costs firms incur adjusting price lists more often