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Transcript
Inflation Inflation & Types Inflation General increase in prices Types 1. Creeping – when inflation stays low for a long time 2. Chronic – when inflation steadily increases for a long time Types cont. 3. Hyper- inflation – worst type, out of control - could go up to 500% a month - leads to economic collapse Causes of Inflation Quantity theory – too much money in the economy causes inflation Demand-pull Theory – when demand for goods/services exceeds existing supplies Cost push theory – when producers raise prices to meet increased costs, leads to wage price spiral. Effects Purchasing Power Ability to purchase goods & services As inflation increases purchasing power decreases Concerns Hard to anticipate the costs of goods/services Lose money on investments Struggle if on a fixed income a. b. c. d. Who would most likely benefit from an unexpected 10% inflation rate? Alex who has $5000 in a savings account Maria, who has $5000 life insurance policy John, who loaned Angelica $5000 last year Angelica, who borrowed $5000 last year