Download Inflation

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