Inflation Basics
This is the genral rise in the level of prices of goods and services over time.
What is inflation?
This type of inflation includes all items in the CPI basket.
What is headline inflation?
This type of inflation occurs when aggregate demand exceeds aggregate supply.
What is demand-pull inflation?
Inflation that is too high reduces this, meaning each dollar buys less.
What is purchasing power?
The Reserve Bank of Australia aims to keep inflation in this target range.
What is 2–3%?
This organisation measures inflation in Australia through the Consumer Price Index (CPI).
What is the Australian Bureau of Statistics?
This type of inflation removes the effects of volatile items like fuel and fresh food.
What is underlying inflation?
This type of inflation occurs when production costs rise, pushing prices up.
What is cost-push inflation?
High inflation hurts this group the most because their income does not increase with prices.
Who are people on fixed incomes?
This global event in 2020 temporarily pushed Australian inflation close to zero.
What is the COVID-19 pandemic?
Inflation is usually expressed as this type of rate. Bonus 100 points if you can state the formula.
What is an annual percentage change/rate of change?
Policy makers focus on this type of inflation for a clearer picture of long-term trends.
What is underlying inflation?
This action can cause inflation to worsen or last longer. Bonus 100 points if you can provide an example of this.
What is predicting or expecting inflation?
Lenders lose and borrowers gain when inflation is higher than this.
What is the nominal interest rate?
In 2021–2022, supply chain disruptions and strong demand led to this inflation trend.
What is a sharp increase in inflation?
The CPI is based on a 'basket' of goods and services that represent this. Bonus 100 points if you know how many categories there are, used to calculate CPI.
What is the spending pattern of an average Australian household?
Underlying inflation can be measured in these two ways.
What are trimmed mean and weighted median inflation?
A sharp increase in the price of oil is most likely to cause this type of inflation.
What is cost-push inflation?
Persistent inflation above the RBA’s target range can lead to this monetary policy response. Bonus 100 points if you know what Australia's currentcash rate is.
What is an increase in the cash rate?
Name one domestic factor that contributed to high inflation in Australia in 2022–2023.
What is labour shortages/housing cost increases/energy price rises?
This type of inflation occurs when the price level rises but at a decreasing rate.
What is the Russia-Ukraine war? (What is an energy and commodity price shock?)
This situation occurs when both inflation and unemployment rise together.
What is stagflation?
This extreme form of inflation, often exceeding 50% per month, rapidly erodes the value of money and can cause a complete collapse of a country’s currency system.
What is hyperinflation?
This policy action by the RBA between 2022 and 2024 was aimed at reducing inflation. Bonus 100 points what was the highest rate.
What is a series of cash rate hikes? 4.35%