What is the general price level?
General price level refers to a collective number attributed as the price of consumer goods in the economy at any time. When determining the general price level, several numbers are deducted from different moments to get an exact figure. This is because the general price level is not the same as the continuous daily monitoring of the price of the goods, but at the moment it is rather the price of goods.
Assigning the number, because the general price level is carried out by testing the consumer goods aggregate to achieve a specific price. This price can be further examined in the future by comparing the previous result with any other result for the purpose of determining the status and behavior of the economy. If the price is relatively stable, the economy can be said to be stable. If the data from separate tests of general price levels increase, this is indicated by the increased damn activities on the market.
study of general price level allows ecoNomos assume factors such as gross domestic product (GDP), inflation and deflation. To see if the price of goods and services will increase, the previous result will be compared with the new one. If the old result is smaller than the new, it is an indicator that there is an increase in price or inflation. The exact percentage of inflation may be determined by deducting the old result from the new one; The difference indicates the percentage of increase.
When the percentages between different periods of research increase rapidly, economists are beginning to worry because this means that the GDP level has not maintained. This serves as a signal for the government to intervene by introducing measures that will reduce the prices of goods. One of these measures is an increase in interest rates. Increasing the interest rate usually serves as a type of economic brake during consumption. The purpose in this is that consumers are more expensive to raise money from banks and other credit facilities.
As a result of an increase, people can be encouraged to save more than they spend. When this happens, the demand for z zGod's and services decreases and the price of these items is also decreasing in response. The impact of this reduction in the price of goods and services is to reduce the general price level.