How changes in other economies can affect inflation in the UK
Economic conditions abroad can push UK prices up or down. A boom overseas raises demand for UK exports and can increase import costs, both feeding into higher UK inflation.
Real World
When US energy prices surged in 2021–22, the UK imported costlier oil and gas, contributing directly to UK CPI inflation hitting 11.1% in October 2022 — the highest in 40 years.
Exam Focus
Name the specific transmission channel (import prices, export demand, or exchange rate) to access top-band evaluation marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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