These modifications in the form of government policy have direct influence of economic output, or gross domestic product (GDP), which is the most widely accepted measure for a country’s standard of living.
Therefore, the accession of an economic state in any country is the derivative of its standard of living....
According to the economist (John Maynard Keynes), a bit of inflation can grow the economy, the accurate measurement will help distinguish between money values and real values in the economy (Parkin, Matthews and Powell, 2005).
Inflation has many types that affect the price level in many different ways, it has been recognisable the prices in the past used to cost and prices of nowadays being increasing on everything such as rent and other living standers (Fernando, 2015).
After July London property has fallen by 5.6% and prices went down by 0.9% as well rent is going down, before a month of Brexit the prices went up by 0.8%, were declining in prices for properties as decreasing in prices a mark that the money is leaving the market (Edwards, 2016).
Inflation can come from two sides which are demand and the supply side of an economy, it also can arise from internal and external events, a rise in value-added tax could increase in domestic inflation for the short term because firm’s production cost will raise, the unsteadiness in the exchange rate will also can cause inflation (Arooj, 2012), for instance, a decrease in the value of pound against other currencies this could cause increase in the import prices for the items (tutor2u, 2014).Main reasons which cause inflation which are: An inflation that results from an initial increase in aggregate demand (Parkin, Matthews and Powell, 2005), It occurs when aggregate demand is increasing at an unsustainable rate which will cause an increased pressure on scarce resources and a positive output gap (tutor2u, 2014).Firstly shifting in AD1 to AD2 due to increase in C I G X-M, which makes to get demand-pull inflation when economic growth is above the long- run trend rate of growth.The long run trend rate of economic growth is the average of growth productivity.Main reasons for the causes demand-pull inflation occur in the UK in the 1980s: Cost-push inflation occurs when rising prices due to the higher cost of wages of production and higher cost of raw material, it is also determined by supply side factor, which causes a decrease in aggregate supply. The data from CPI and RPI rates are used in a lot of ways by the government and business, which will play an important part in the economics, which will help Bank of England uses inflation to set interest rates (BBC News, 2014), it also have some impact on people’s income and wealth.The most common household original income called mode, original income usually includes wages, interest and rent profit earned before paying the taxes, UK is separated into two groups, one is half of the UK had greater income and the other half had less income.This report will help us to know the relationship between inflation and other parts of economics in the UK.The aim is to provide an explanation for the inverse relationship between economic growth and inflation in this economy in given period.(2010): An advantage property of the geometric mean is that it can get better changes in people spending patterns relative to changes in the price of goods and services.RPI is constructed using the arithmetic mean (AM), two different methods, for instance, the AM calculate if one price increased by 25% from the base period which= 100 and another decreased by 20% their new index values would be 125 and 80 the AM of these is: Last 10 years UK financial crisis began and causes too many damages for the UK economy and growth and still facing it, and now a historic event for the UK which is Brexit.