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Inflation

Brief introduction to inflation for AP Macroeconomics class
by

Tammy Brown

on 5 October 2011

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Transcript of Inflation

http://www.flickr.com/photos/peterjlambert/
http://www.flickr.com/photos/thetruthabout/
http://www.flickr.com/photos/alancleaver/
Is Bad
Who is hurt?
Fixed income receivers
Savers
Creditors
Who is unaffected or helped?
http://www.flickr.com/photos/roadsidepictures/
Anticipated Inflation
people adjust their nominal incomes to reflect price changes
I need a raise!
Lenders build inflation rates into their interest rates
real interest rate = nominal interest rate - inflation
Real interest= the percentage increase in purchasing power that the borrower pays the lender
Demand Pull
Cost Push
PL
Q
D
S
S
2
Caused by an excess of total spending beyond the economy's level to produce
Caused by rising per-unit production costs.
Demand increases
PL
Q
Q
PL
Supply decreases
Inflation
Different
perspectives

Is Good
Debtors
Union workers with COLAS
government
officials
Full transcript