Download File - Mr. Costanzo

Response Question
Talk to the person next to you compare what you came up with
for the following questions.
What is inflation?
What causes inflation?
Does the US have an inflation problem today?
Write down the best answers on a single sheet.
How did you answers differ?
How did you determine which answer was right?
Inflation
Inflation: an increase in the
price level, or avg price of
goods.
Inflation effects Purchasing
power, the ability to buy goods
is decreased with rising
prices.
Inflation Rate is the percentage of change in
price over time.
Three theories of why inflation happens
Quantity Theory
Too much money in the
economony causes
inflation
to stop it increase the
money supply at the
same rate the economy Cost Push Theory
grows.
When Producers raise
prices to meet
increased costs.
This can cause wage
spiral. Wages increase
lead to higher prices
and thus higher wages.
Demand Pull Theory
inflation occurs when
demand for a good
exceeds supply
What does inflation affect?
Purchasing Power high
inflation would mean
the dollar you have
cannot buy as much.
Interest Rates When
inflation rate exceeds a
banks interest rate you
are actually losing
money.
Income
If your income does not
increase each year with
the inflation rate each
year you lose money.
To determine whether
there is inflation the
Consumer Price Index,
or CPI is used.
CPI: The price of an average basket of
goods compared with the same basket
one month or year earlier.
A high increase in CPI indicates higher
inflation.
In your response section answer the follow 4 questions
1. Inflation is
(a) the process by which rising wages cause higher prices.
(b) the price increase of a typical group of goods.
(c) a general increase in prices.
(d) the ability to purchase goods and services.
2. Too much money in the economy is the cause of inflation according to
(a) the quantity theory.
(b) the demand-pull theory.
(c) the quantum theory.
(d) the cost-push theory.
3. Explain how inflation effects us personally.
4. How is CPI determined?
How Coca Cola wen unaffected
by inflation for 70 years.
So why wasn’t Coca Cola not affected by inflation
when everything else around it was?
Can you think of anything else that’s been the same
price for a long time?
Was Coca Cola finally affected by inflation?
How/why?
Find it at
mrcostanzo.us
Find it at
mrcostanzo.us
Find it at
mrcostanzo.us