Pool, there are two ones you could go down. Yeah the cause to push. So the cost will increase. So expectation of inflation. So I think maybe something about wage or raw material, Yeah maybe the workers want wage more. And in the demand pool, demand pool, okay, if spice will decrease inflation, so that is negative spice. If you say it that way, because you could always do it the other way, can't you? So demand pull, there can be an increase. In agquate demand. Explain to me why this statement I've written is. Why does a decrease in interest rates lead to an increase in aggregate demand and more consumption? Increase rease in interest rate means people can borrow more and spend more. So the consumption will increase and then that will increase the aggregate amount that that will Yeah inflation. Perfect. That's that. A lovely answer. Yeah. Can you see the other one you could do is so when you're thinking about inflation, always think about these two things. Yeah and there's lots of different variants of that, but I would say these or obvious ones to start with. So you could do cost push raw materials. The price of wages goes up, the price of energy goes up, the price of raw materials goes up and this leads to businesses passing on that increase in price to consumers. Yep. But if wages have gone up then actually what's happened is they're gonna to charge more because they have to pay these wages. Okay, so there you're two kind of things whenever you're thinking of inflation, the is your best way to kind of think about it. And there's lots of different versions of cost push. There's lots of different versions of demand pool, but they're very good kind of basis to form your answers around. Okay, I'm sure we'll come up with these again. We'll meet these again. From the above data, it can be deduced that percentage point difference between the cpi and the rpi was what data? Oh, this data, sorry. Yeah, this data was a question. Let me scit down up percentage point difference between cpi and rpi was. Firstly, cpi is 21% and rate of inflation is 1.5 and measured by the as measured by the retail price index. Yeah is that. This one Yep exactly right. Okay, okay. No wonder that is one mark. Yeah Yeah Yeah. Sometimes when they're so simple though, you kind of freak out a bit and big is it about missing something? Just the coupon of one -15. Yeah very good. Very good indeed. Okay, right. Define the term price level, price level, I don't know. I don't really like that price level, price level that would be how would I define the price that is the cost. Average cost of prices, a good for service. No average prices, logo average is the average prices of a good service at this time. Yeah. So the price level is just how much does that cost? But obviously, how much that costs in one shop is slightly different to another. So it's the average. So if I said to you, how much does an iphone cost to buy on one website, it might be, let's just say, 1200 pounds. And on another website, it might be 1250 pounds, and in the apple store, it might be 1300 pounds, or the average, the price level is the average of all the prices at this time. Yeah so the are average prices of a good or service okay yeyep. The chart below shows uk inflation as measured by the consumer price index from 2011 to 2015. Which one of the following statements is correct about the uk's inflation record between 2011 and 2013? Okay so between just be I haven't actually looked at the question but just be careful of that and this goes up to there so just be a little bit careful of that don't to scroll the off and down. Okay the data. Annual percentage change in price, price change in price, percentage change in price. So the uk expected cpi food and fuel, other foods and services. So food and fuel pertly change in price, so other goods and services and cp I C P I so. Maybe business, this one voting average price. Hang on. We're just going to check you this sort of. Which one let me look at it. Which one of the following statements is correct about the uk's inflation record between September? And so this bit. No, it's not. It is look, just be careful because this is anything above this line. Look, it's still a positive change. It's only when it hits below here it becomes negative. So only at these points. Has it entered into. That one. Fallaverage prices. Do you know what it could be falling average prices, but. I think it's this one, but I can see why you've done falling average prices because they're sort of the same. I think it's diffas inflation because prices are still rising, but not as fast. Because if you look each year, each sort of section, the let's just look at any other lines, but let's look at this dotted one here. This one. They're still rising. No, it can't be that one. It can't be that one can't be that one. It's that it is that one, right? Because. Here. So January 2012, I'll we do the yellow line. The inflation rate was 2.75. It's gone up by plus. Plus 2.75 roughly, I don't know, percent Yeah inflation at that point. So the prices are rising by plus 2.75%. And then at this point, let's go a different color a bit later. Prices are still rising. But now by 2%. So they've got up there rising by plus 2% at this point. Okay. So the average price can't be falling because they're still increasing by you know plus, but they're increasing more slowly. And then at this point here. Well, it goes a bit longer, but Yeah, it's that they are still rising, but they're not rising as fast. That's the answer. So it's this one because average prices are not falling because it's still going up in price, but just not going. Inflation is just not as high as it was. Does that make sense or not? No, that is deflation. So that is decreasase, but so fast, but not so fast. So that is deflation. No deflation. No, this inflation would be any of this. That is deflation. That's deflation. That is this inflation. So Oh, this Yeah, this sorry, sorry, you're right. This is deflation. Yeah and that one is this inflation. So that is Yeah, the inflation doesn't grow so fast. Yeah. Prices are still rising, but not as fast as they were, which is probably where we are now. Actually, disinflation in the uk prices are not falling. We're not in deflation, but it's not as quick. The inflation rise. Or with reference to data provided, explain the process of calculating the rate of inflation in the uk using the consumer price index. Rered to the concept of weights in your answer, can you remember what the consumer price index was made up of? You remember anything about the consumer price index? Consumer price index? Consumer prices in the know. Is that the national income of the whole of the uk government? No, no, nearly. It's the one about the basket of goods basket. Can you remember see your basket of goods? Yeah. Okay, so it looks at representative baskets of good. It looks at the average price of these goods and measures the increase in the price of these, you know, over a period of time. The items are weighted to reflect the reproportion of money spent on the average of each product. So for example, it will give more waiting to milk because people buy more milk then it will on do people not buy very often asparagus or I don't know, something a bit more whighlighters? Okay, people are going to buy more milk than they are highlighter pens. So therefore, it puts more weight. Milk is more important. So things like food or fuel would really influence the consumer price index. So it's the way of measuring inflation. So okay. Can you remember that? Do you want me to. Representative basket of goods, the average price of these goods measure the increase in price of these, the items are weited to reflect the proportion of money spent on average on each. Yeah. Yeah. So okay. Yeah so firstly we should find a basket of goods and then see average price and then increase the price of this. Compare it to before and we reflect the proportion money spent. So we should ask them and make a percentage graph, it's like that. So we should make sure about the proportion Yeah what what they spend their income on so on average on each product, so we can make an average value. Okay. Yeah, got it. Yeah and it's not that we make up the basket of goods. The government has come up with the basket of goods. It's the way the government measures inflation. Okay? But you're exactly right. And what you said. Yeah. Yeah, okay. Okay. Calculpercentage change in the uk consumer price index from September 14 th to 15. Sentence change again. Oh, wasn't it change? Dot point two divided by 128.4. 1.6 times ten, choose the minus three. But Yeah maybe I forget got one step times 100 and open note point 16% perfect. That sounds much better than the other one. Okay define the term deflation deflation negative inflation one mark over Yeah prices decreasing the which one following is most likely to be a cause of deflation? A fall in a fall in firstly oil price maybe so on employment with the definition of deflation. So the price, the price of goods will decrease as of prosing power will increase. So that is deflation. So if is that a fall in interest rates, fall in income tax rates, fall in unemployment and fall in oil prices? So the purchasing power of us, the purchasing power will increase. And one premise, that is the goods. Has lower price lower price the. Price has lower price. So and our purchasing power is increasing. So maybe this one on employment because more people are working, more people more goods are produced and more wage can spend. Yeah I can see why how you've argued that artagon oil prices artagon with your initial thing because it brings down the price of it. I can see why you've argued oil unemployment. And the way you argued it, you argued it right? Income tax rates. Income tax is going to go down. People are going to. No, no, no. Income tax is going to go down. People are going to have more money to spend, so that's going to cause inflation. Hang on, let me just do your unemployed. Interest rates have gone down, so people are gonna to spend more, which is gonna to cause inflation. Unemployment goes down, so there's more people employed. Which leads to purchasing power increasing. More people avoid increasing agate demand. Now that's going to cause inflation, isn't it? And then you've got oil prices. So raw materials will be cheaper. So we're going to have. Basically costs related deflation, aren't we? Yeah price delation oil bues so how about purchasing power purchasing power increase? Yeah, you can buy more of it, but because your purchasing power has increased because of the fact that the price of its decreased here. Okay. Sis. Oh, hang, let's see what the question is first. Oh, authis a lot. Hang on. With reference to the first paragraph of extract a and figure one, explain the how the change in exchange rate of the pound has contributed to rising inflation. Okay. Tell me how you're getting the four Marks first, not the answer what you need to do of four Marks. Four Marks, references to first paragraph, first paragraph figure one exchange rate of plant contributed to rising inflation, spiced the result formmarks. But four Marks, what we need to do, we need to do 11 for the answer. One for evaluation, no, it's more analysis afterwards. Yeah. Two for numbers, stroke application, Yeah. So we're going to have to use the case study and then one for analysis. Evaluation. Yeah. So we definitely need to use the case study, otherwise we will never get our top Marks. So we need to find first paragraph a and figure one, extract a and figure one. Figure one is. This so figure one as a graph so we could use some numbers and extract a is here. The inflation rate exceeds bank of England 2% target. And there we go. Sharpincreases in in food price as a result of the fall in the exchange rate of the pound have contributed to rising inflation. So increasing food price without a fall in exchange rate and food price has increased by 3.5% points. So that will that is increased. The price of the food is increasing and the exchange rate of the pthat is the cause exchange rate of the pound become weaker than before. So, so Yeah, so the net it is demand inflation. So Yeah, that is the net export increases because that is the, that is negative spiice. So about that it is it will decrease. That increase increase the food prices over Yeah because what that's showing is that the uk must import. A lot of their food, which we know is and as pound weak. The costs increase. Yeah the cost increases, which leads to inflation and then weput that 3.5% increase in. And the other bits as well. Yeah, that's not too bad. We could have put in what what was the other option? The graph shows annual percentage change. I can't remember what the dates were, but we could have used a figure off the graph. Okay, we won't worry too much now because you can read figures of graph. So it's not in know it's not broken as long as you remember to use the case study as long as you know it's not too difficult. You've got it right. It's just the fact that the exchange with the pounds weaker, they can't buy as much massive impact on food prices and use some numbers from the case study. With reference to abstract a, explain two likely economic effects of a higher rate of uk inflation. Higher rate of uk inflation. Six Marks and reference to the extract a whereas extract a Yeah I say extract a. This one increase in food price Yeah so fact, increase in food price affect people on low fixed incomes the most. It delives them with very little money to spend on relatively more expensive items. And Moreover, the bank, bank of England, has observed a rise in the size of personal debt relative to income. And in order to maintain the standard of living, standard of living, so many consumers on low fixed price incomes are using their credit cards to taking out short term loans to fund their spending. So for the, so for the government, they should give the government spending for these low fixed income people to lend them to survive. So what I see that Yeah Yeah I say is very so I just mentioned the low fixed incomes so how about high fixed incomes? So it is unequal it it is it it happens in unequally in in that in in unequality perfect yes Yeah between the wealth people and poor people Yeah wealth people doesn't affect but poor people Yeah Yeah affect a lot yes yes exactly right exactly right. And you could go even further to that in that remember when we talked about lower poorer people or lower income people spending a larger proportion of their income on necessities they buy, you know they spend it on very few luxuries, don't they? And exactly like you said, if they're inif, everything's more expensive, it affects them more. Very good. That's good evaluation. Nice. Okay. So that would be A I would do it because you've got to be careful with these ones where it's like two points. I would do that as my first point, which you've kind of done. You know you've got quotes there, etcetera. What about what about this one? It's your second one. What kind of happens here? What's this about? Credit cards to take out shorterm loans to fund their spending. So the loans interest rate may be they will increase because if they increase the interest rate, they can earn more money and they can get more income if if someone is working in the bank. So that is one facof of the old firms. So interest rate will increase. Yep, Yep, Yep. They're spending more. They're purchase, you could always use purchasing power in here. They've having to take out more debt, which, you know, unstable in the long term. Yeah, it's good, good, good, good. Not too bad a question at all, right? Where we actually Oh Yeah. With reference to the last paragraph of extract a and figure two, explain one reason. Now it's one reason. So it's all good up to link why it's necessarily to regularly update the cpi basket of goods and services. With reference to the last paragraph, extract a and figure two. Figure two. And the last part, last paragraph is where os has abdated, a shopping basket that is used a measurement of the uk inflation to reflect lifestyle of households in the country. Technical, technological advancement, change in consumer and the move towards health, fitness and gluten free products have made it essential to revise the 2017 baskets. So firstly, cpi is that. Is. I think it's a measurement it is a measurement of calculating the purchasing power is a measurement of inflation by looking at okay, and of inflation with a basket of goods. The purpose of the uk government is that they want to know they want to know that the where the residents spend their income on Yep. And how that is impacted by the rise in prices, how going impact. So that is liscsorry lifestyle also. So technically, advancements, changes in consumer taste and move towards health. So how to say that? So what it's what the question is asking is, so you've got this basket of goods, okay, here of all different things than it, whatever it is, blah, blah, blah, this and this. And what we as a government do, we're measuring this basket and then a year or so later, we're measuring the basket again to check, see how much the prices have increased. Okay. But what it's the question is saying, why is it important to look at this basket and think, do we use the same basket each year or do we update the things that go in it? And the answer is, obviously, they have to update the things that go in it. And why is it important to update the things that go in it? Well, they've given you all these answers. It's important to update them because of technological advances, consumer tastes. I would I would leave these ones because you've only got to pick one. I would pick either that one. Or that one. So you've got to pick one and say why it's important, okay, style or Yeah, I will choose like style of households because if the if the uk government no, it uses cpi to reflect the like to know about the lifestyle of households. So they will keep, they will encourage the workers and maybe they will encourage firms to produce more goods that will attract that will attract the interest from the consumers. So that will increase the increase the consumption, so that will increase the aggregate demand. Okay, you you sort of right, but you've just kind of missed the question a little bit. The question is asking why is it important that the basis updated regularly with different goods and it's lifestyles? And you're exactly right that people will buy different things and if they don't update the goods in the basket, it won't be a accurate reflection. So they need to make sure that they're up to date reflecting the things, the lifestyle the lifestyle of the things people are buying or it won't be a proper measure. So if we do the technological advancements, one, okay, we wouldn't have to do both. But just so you sort of understand how the question would be answered, so we would do. Our definition of cpi is a is a way that the government measures inflation by looking at a weighted basket of goods and services, but one year to the next to measure the price increase. It is important this is constantly updated. One of the main reasons is because of technological advancements in society. If this basket was not updated regularly, then it wouldn't reflect any technology that people were buying, especially as for example, 15 years ago, you know people would not have been buying mobile phones, but now everyone has a mobile phone and therefore it should reflect in the basket of goods Yeah or something like that. The lifestyle one, it needs to reflect what people are doing, because the lifestyle of people, what people are doing now is not going to be what people are doing 50 years ago. You don't do the same things as a child as your parents or your grandparents. You know, lifestyles have changed, haven't they? And the measures should reflect that you're not the same as your grandparents, who are not the same as their grandparents because, you know, technology and lifestyle moves on. Does that make sense? Leit's basically saying, why should they keep what they measure up to date? Well, they should keep it up to date because people don't buy. Yeah maybe the demand will change easily. Yes, Yeah will change over. So so if the uk government can use the can use the cpr to know about the the attraction of. To know about what the what consumer interests. So they will so maybe they will adjust more and produce more goods. And Yeah, as I mentioned, that will attract the customers interest anyway, that will increase that will increase aggregate demand, I think good. Yes. Yes. Good. Right now, we need to find our question that we have to get going up and back down. No, we've seen this graph before, I know, but he's just find the question, Oh goodness, okay, evaluate the likely impact of high inflation on the uk government's macroeconomic Oh my goodness, may we're on a big one, okay, on the uk government's macroeconomic objective. So basically what the question is, what's the impact of high inflation? What is saying about it? House prices are still rising rapidly. This is obviously old this data, by the way. Okay, which so what's the question? The question is evaluate the likely impact of high inflation on the uk government's macroeconomic objectives. So okay. Okay. So Yeah, I see a still rising rapidly and the loss of consumer confidence consumer confidence. So that will if that is less consumer confidence, so maybe that is less investment. Good what? Yeah Yeah consumer confidence confidence they are not they are not confident to buy one thing so the so the x ts entrepreneuentrepreneurs. What's not? Country perennial no. Is that this? Preneur trepreneur Yeah Yeah this one so anyway, many firms well not what is unsure whether they should invest to pay for or to to invest for this for this part. So there's less investment and annannual growth increased from 5.2% in July 2016 to 5.6. Growth increases. Oh Yeah, there's subject. So house prices and house prices increase. Prices, so the purchasing power could be a problem. And the strongest in lonannual average wealannual fell by 5.2, 5.2. So about that we can get that if there is high inflation, maybe there's the aggregate amount will decrease because there's less investment and less consumption. Good. Good. Can I just say, well, you see here we've got lots of information about the differences between like Wales and London. I remember really average price rising by 9.6%. But however, Yeah, however, on the wells, wells average house price actually four by not point 5% deterians same period. So it first post brixit referendum forecast, estate agency countryside said that house price will fall by 1% across the uk in 2017 before rising by 2% in 20. So so is that before rising 2%, four by 1%? So in comparison. The price growth is strongest in London, which is the capital in the uk and in the walls and and in the counwide. The house price isn't growth growth as fast as London. So maybe will that will like like immobility. Is that immobility that I mean, many people willing to live in Wales and countrywide. Counwithe name, counwithe name of the estate agent. I can see why you're getting confused, but go on, keep going. Keep going about Wales and London. 来。Oh, it's cutting out a bit either. Said ages. Okay okay instead agency so countryside that so Yeah I think maybe immobility for this so that will I'm there risk. I think I think it's caught up now. I think we're okay now. I think Yeah, Yeah, maybe I think maybe. Shall I do it so I would? It's really wherever you've got two different figures within the same country having different you know different impacts, it's a really good evaluation point to put in that actually this shows that any government policy would not work the same across all areas of the country. And how difficult it is for a government to create a one sort of size one size economic policy for the whole country because different different areas are having positive and negative income, fact. So you could write something like these. Differences in figures across the regions show that. I know. Its differences in figures across the regions show that there are differences in sorry, should be inflation, inflation, inflation. The no, it should be inflation. Sorry. Okay. This means that it is nearly impossible for. Government. Ments to create and economic policy. Which is suitable for all areas of the country. Since different economic phenomenon in different places in this country. So nearly so Yeah so there is a difference along there is still the increasing house price well in the areas in this interdevlation. Yeah. Yeah so wherever you'll see, wherever you've got a question or information, sorry, and it gives you like, Oh, this is happening here like this, and this is happening here like this, and they're different. It's really good to you know how you point out the difference between the impact on the rich and the poor. It's really good to point out the difference between actually, the policy would be different here and here they're very different. Like when people talk about the country or what the government should do, a macroeconomic policy is for the whole country. Well, it doesn't impact everybody the same way. And this area needs one thing and this area needs the other. So to actually find a policy which is suitable across the whole country is really difficult when there's such differences. I mean, you've got in London, the house price is still in this time. You know, like I said, it's historic data. The annual house price is going up by 5% and 9%. And then you've got another area where house prices are actually falling. Well, how can you create a policy, a macroeconomic policy, that helps with both the rising and the falling house prices? They're two different things. So it's really difficult. Okay. Okay. What else should we have a look at very quickly? What about inward migration and inflation? Migration of inflation make migration if that is migration. So that is more consumption for this because more people come here. So that is multiple inflation because that will increase ad aggregate demand. Yeah. So the cuso, if that's causing inflation, what should the government's policy be on migration? The government Yeah should they control inflation? Should they sorry, control migration to try and control inflation? They don't control maybe they don't control migration. Yeah, they maybe they can limit the population. Of they can leave with a under the Yeah they can set more policies for this migration in and let it become more difficult. Yes and that would help control inflation wouldn't it as we've argued you know, because it would lead to demand demand less demand pull inflation very good. Good. Okay, I will leave you to I don't know eat dinner bed what what's the plan? Get ready for bed you have a rest, Yeah okay alright, well I will leave you to it, okay speech you soon, bye bye bye bye.