Download Life With Inflation

Life With Inflation
Inflation
 General
increase in the price level of goods
Inflation
 General
increase in the price level of goods
 However,
this is an estimate, as some goods could
actually decrease, but others rise
Consumer Price Index (CPI)
 Tool
for measuring inflation
Consumer Price Index (CPI)
 Tool
for measuring inflation
 Survey
21,000 stores then compare them to a base year
Consumer Price Index (CPI)
 Tool
for measuring inflation
 Survey
21,000 stores then compare them to a base year
 The base year is given an index value of 100 and the
this year is totaled and compared
Consumer Price Index (CPI)
 Tool
for measuring inflation
 Survey
21,000 stores then compare them to a base year
 The base year is given an index value of 100 and the
this year is totaled and compared
 If
this year receives a 115, then inflation is 15%
Types of Inflation
Inflation – there is a shortage of
goods (high demand)
 Demand-Pull
Types of Inflation
Inflation – there is a shortage of
goods (high demand)
 Demand-Pull
 This
is a good sign that the economy is doing well
Types of Inflation
Inflation – there is a shortage of
goods (high demand)
 Demand-Pull
 This
is a good sign that the economy is doing well
 Often times, this inflation is found in times of war
Types of Inflation
Inflation – there is a shortage of
goods (high demand)
 Demand-Pull
 This
is a good sign that the economy is doing well
 Often times, this inflation is found in times of war
Inflation – prices go up b/c of an
increase in the costs of production
 Cost-Push
Who Wins? Who Loses?
Who Wins? Who Loses?
 Hurt:
Who Wins? Who Loses?
 Hurt:
 Those
with a fixed income
Who Wins? Who Loses?
 Hurt:
 Those
with a fixed income
 Creditors, or those who have loaned money
Who Wins? Who Loses?
 Hurt:
 Those
with a fixed income
 Creditors, or those who have loaned money
 When
repaid a loan, their $ buys less
Who Wins? Who Loses?
 Hurt:
 Those
with a fixed income
 Creditors, or those who have loaned money
 When
repaid a loan, their $ buys less
 Business
activity
Who Wins? Who Loses?
 Hurt:
 Those
with a fixed income
 Creditors, or those who have loaned money
 When
repaid a loan, their $ buys less
 Business
 People
activity
may buy less
Who Wins? Who Loses?
 Hurt:
 Those
with a fixed income
 Creditors, or those who have loaned money
 When
repaid a loan, their $ buys less
 Business
 People
activity
may buy less
 If inflation goes up, so do interest rates, meaning businesses
will take out fewer loans
Who Wins? Who Loses?
 Helped:
Who Wins? Who Loses?
 Helped:
 Debtors,
people who have borrowed money
Who Wins? Who Loses?
 Helped:
 Debtors,
 Higher
people who have borrowed money
inflation means higher wages which means that they
can pay off previous loans easier