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What is Inflation? Effects Inflation has on the Trafford Centre. How does The Bank of England control Inflation?

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Introduction

Inflation What is Inflation? Inflation is a general and progressive increase in prices, usually measured over a period of a year; in inflation everything gets more valuable except money. There are two types of inflation- RPI (Retail Price Index) and CPI (Consumer Price Index), the only difference between both of these types of inflation, is that RPI is an average measure of change in the prices of goods and services- and includes house prices and the CPI is the same as the RPI- except it excludes house prices. The Bank of England Monetary Policy Committee tries to keep inflation steady at the Government's 2% target, although this target isn't always met, What Causes Inflation? ...read more.

Middle

For example, if raw materials increase in price, this leads to the cost of production increasing, this in turn leads to the company increasing prices to maintain profits. How is Inflation calculated? Inflation is calculated by selecting thousands of prices for goods and services, known as the 'basket of goods, and then they are analyzed to check if there has been an increase in price over the month, if an item or service costs more, which means that it has been Effects Inflation has on the Trafford Centre The Trafford centre is affected by the inflation rate, because if the inflation rate increased this would make the prices of the items the stores are selling increase, therefore this would make the Trafford centre less demanding to come to. ...read more.

Conclusion

How does The Bank of England control Inflation? The bank of England controls inflation through interest rates so if inflation rates increase rapidly, then the government need to slow down spending rates, they do this by increasing the interest rates which increasing the price on mortgages for example, therefore, people have less money to spend, meaning the inflation rate will go down. Moreover, if the inflation rate decreases then the government wants to encourage people to spend there money, which increases spending rates, meaning mortgages goes down, giving people spare money to spend on clothes, food ect. ?? ?? ?? ?? Scott Goddard 25/03/2010 Page 1 of 2 ...read more.

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Here's what a star student thought of this essay

3 star(s)

Response to the question

This essay responds to the question well, giving a good overview into inflation and its causes. I would've liked to have seen the effects explained a bit further, and an aggregate demand and supply diagram would have strengthened the analysis ...

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Response to the question

This essay responds to the question well, giving a good overview into inflation and its causes. I would've liked to have seen the effects explained a bit further, and an aggregate demand and supply diagram would have strengthened the analysis considerably.

Level of analysis

The level of analysis in this essay is sound. I like how they've acknowledged the difference between RPI and CPI. It would've been useful to note when RPI is used and when CPI is used. I would be careful when defining inflation, as it is very easy to sound ambiguous. For example "in inflation everything gets more valuable except money" suggests that everything is worth more, whereas it should state everything costs more. Purchasing power could've been discussed here. When looking at the causes of inflation, I would always advise drawing an aggregate demand and aggregate supply diagram. They would then be able to use the technical terms and show a shift in the curves representing demand-pull and cost-push inflation. I would've liked to have seen some awareness of a wage-price spiral when put into context with the Trafford centre: employees will want higher wages due to higher prices.

Quality of writing

This essay is structured well, with the clear subheadings making it clear what is being answered. I like the style used, and the language is sophisticated throughout. A few more diagrams would've been nice!


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Reviewed by groat 25/02/2012

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