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Copy of Inflation Lesson
Transcript
Inflation
- Monetary Inflation: Increase of the money supply
- Price Inflation: a general increase in prices across the economy
When The
Money Supply
Purchasing Power
Value of the Dollar
Inflation Rates
HISTORY OF
US INFLATION
Theories of Inflation
Examples Price Inflation of Specific Goods
Quantity of Money Theory
Do not forget the time lag
Too much money causes inflation
Cost-Push Inflation Theory
When the cost of producing a good or service increases.
- These goods are usually imported
- They have no suitable replacement
- This only works for price increases on specific goods and services.
Review: Law of Supply and Demand
Demand-Pull Inflation Theory
Prices rise due to increased demand or money supply.
- "Too much money chasing too few goods."
- Implies high level of employment.
- Questionable! People are employed because they are more productive, supplying less expensive goods and services
TODAY?
This works for money too!
Duck Tales Inflation
Consumer Price Index (CPI)
A measure of the price for a group of goods or "market basket."
NOT JUST HERE
http://www.financialsensearchive.com/fsu/editorials/dollardaze/2009/0223.html
Hyper Inflation
The Federal Reserve says "Good" Inflation is usually between 2-4% and "Bad" or out of control inflation is between 10-20%. WHY THE DIFFERENCE?
It is claimed that "Good" inflation stimulates the economy and is PREDICTABLE.
Examples of Hyper Inflation from history:
In July of 2008 Zimbabwe's inflation rate rose over 200 million percent
Germany in 1920's and Zimbabwe 2008
Zimbabwe has since used foreign currency