Economics Grade 12 Notes for 2025 are available for download in Word and PDF formats on this website.
CONTEMPORARY ECONOMIC ISSUES
INFLATION
- Inflation
- Description: A sustained and significant increase in the general price level over a period of time; and a simultaneous decline in the buying power of money.
- Ways to measure inflation
- Indexes –  two indexes are used Consumer Price Index (CPI) and Producer Price Index (PPI).A price index is compiled by using the prices of a representative range of goods and services which are recorded on a regular basis.
- Weighting – Each item in the basket of goods and services is given a weight. This weighted index reflects the importance of an item in the basket. The higher the weight the more important is the item.
- Inflation rate: The inflation rate is determined by using changes in the CPI and/or PPI index. The figures for each month are compared to the corresponding month in the previous year
- Types of inflation
- Consumer inflation:
–Headline inflation– unadjusted CPI rate; (is measured by CPI); consists of a shopping basket of goods and services of an ordinary South African household in urban areas.
It is used for inflation targeting, meaning when it is above 6% SARB may increase interest rates.
–Core inflation– excludes item in the CPI basket that have volatile prices (continually changing) and those affected by government intervention. Examples vegetables; fresh and frozen meat and fish; interest rate on mortgage bonds; VAT and assessment rates.
Core inflation is lower than headline inflation and is often stable.
– Administered prices– prices that are controlled by the government through authorities. e.g. electricity (NERSA),
- Producer inflation: Producer price index (PPI) measures prices of domestically produced goods.
Difference between Consumer Price Index and Producer Price Index
| Consumer Price Index | Producer Price Index |
| Pertains to cost of living | Pertains to cost of production |
| Basket consists of consumer goods and services | Basket consists of goods only |
| Capital and intermediate goods are excluded | Capital and intermediate goods are included |
| Prices include VAT | Prices exclude VAT. |
| Interest rates are taken into account | Interest rates are excluded. |
| Prices of imported goods are not shown | Prices of imported goods are shown explicitly |
Downloadable Economics Grade 12 Notes
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- Worksheet 4Â +Â Answers
- Worksheet 5Â +Â Answers
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- Worksheet 8Â +Â Answers
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- Worksheet 21Â +Â Answers
- Worksheet 22Â +Â Answers
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- Contemporary Economic Issues Revision Booklet+Â Answers
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