 Meaning of Inflation  a rise in the general level of prices  Consumer Price Index ▪ An index that measures the prices of a fixed market basket of goods.

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 Meaning of Inflation  a rise in the general level of prices  Consumer Price Index ▪ An index that measures the prices of a fixed market basket of goods and services that is bought by a typical consumer. ▪ Statistics Canada sets the CPI for 2009 equal to 100, so the CPI for any particular year is 1©2013 McGraw-Hill Ryerson Ltd.Chapter 7, LO3

 Rate of Inflation  Example: the CPI was in 2011, up from in So the rate of inflation for 2011 is 2©2013 McGraw-Hill Ryerson Ltd.Chapter 7, LO3

3©2013 McGraw-Hill Ryerson Ltd.Chapter 7, LO3

4©2013 McGraw-Hill Ryerson Ltd.Chapter 7, LO3

 Demand-Pull inflation  Excess demand  Cost-Push inflation  Due to a rise in per-unit production costs  Supply shocks  Complexities 5©2013 McGraw-Hill Ryerson Ltd.Chapter 7, LO3

 The underlying increases in the Consumer Price Index after volatile food and energy prices are removed.  Policymakers become greatly concerned when core inflation is high and rising. 6©2013 McGraw-Hill Ryerson Ltd.Chapter 7, LO3

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