KEY TAKEAWAYS - CHAPTER 35 SUMMARY


Measures the rise in prices of goods and services over time in an economy.


Measured by the CSOusing the Consumer Price Index (CPI). It is used to calculate changes in the cost-of-living . Causes of inflation:


1. Demand-pull (high demand creates scarcity and pushes prices up)


2. Cost-push (higher costs lead firms to raise prices to maintain profits) 3. Government-induced (eg increases in VAT lead to higher prices).


1 Inflation Impact Of Changes In Inflation


Individuals: Stable prices make it easier to plan as purchasing power remains similar.


Rising inflation reduces purchasing power leading to a lower standard of living. Businesses: Stable prices allow firms to maintain profits


Rising inflation means higher costs, reducing profits or causing price increases. Economy: Stable inflation supports steady growth


High inflation may lead to higher government spending on cost-of- living supports.


Employment rate: Percentage of people of working age in paid work.


Unemployment rate: Percentage of the labour force actively seeking work but unable to find it.


Around 4% unemployment = full employment in an economy Positive trend: A fall in unemployment, or a rise in employment. Negative trend: A rise in unemployment, or a fall in employment.


Impact Of Changes In Employment/Unemployment: 2


Employment / Unemployment


Individuals: Employment provides income and improves standard of living.


Lower employment reduces disposable income lowering standard of living.


Businesses:More employment increases consumer demand increasing sales. Higher wage costs if there are labour shortages.


High unemployment reduces sales/profits, but easier to recruit at lower wages when there are more workers unemployed.


Economy: Higher employment increases tax revenue (higher PAYE, USC).


Higher unemployment increases government spending on Jobseeker’s Allowance.


404 2


STRAND 3


CHAPTER 35:


Economic indicators


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