Download 1.3.1 Study - Inflation and Recession (Study guide)

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1.3.1 Study: Inflation and Recession
Mathematics of Personal Finance
Study Guide
The questions below will help you keep track of key concepts from this lesson's study
activity. Use the study page numbers listed to help you fill in the blanks or solve the
Page 2:
Define the following terms:
purchasing power:
Page 3:
3. In your own words, write how the scenario of the car for sale shows how the
purchasing power of the dollar falls.
4. Now, imagine that you and your friends are given even more money — $100,000 —
and are asked to bid on the same car, starting again at $5000. What do you think will
happen in this case?
Page 4:
1. Listen to the audio for World War II. Summarize why wars tend to cause periods of
high inflation.
2. When did Nixon close the gold window? What did this mean?
Page 5:
1. Define deflation.
2. Label the following diagram.
Page 7:
What can be used to help determine the changes in the purchasing power of the dollar?
Page 8:
1. Use the CPI table to answer the following question. If a car cost $10,000 in 1960, how
much would it cost in 2009?
4. How much would a house that cost $150,000 in 2009 cost in 1980? Round your answer
to the nearest dollar.
5. The CPI for 1930 was 16.7, while for 1939 it was 13.9. If an item cost $100 in 1930,
how much will it cost in 1939? Round your answer to 2 decimal places.
Page 9:
Label the periods of inflation and deflation on this graph.
Page 10:
You have seen that since the 1980s we have been living in a time of steadily increasing
inflation. Is this a good or bad thing? Write your thoughts here.
Page 11:
Fill in the blanks. Inflation values
while deflation values
the economy goes through consecutive periods of deflation, the economy is in a
Page 13:
1. Define economic depression.
. If
2. List some of the characteristics of recessions and depressions.
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1.3.1 Study: Inflation and Recession