McKenna White Lindsay Gilliam Josh ish. Inflation General increase in prices of goods and services which also leads to a decrease in the value of money.

INFLATION

McKenna White

Lindsay Gilliam

Josh ish

Inflation General increase in prices of goods and

services which also leads to a decrease in the value of money.

Inflation is not just the rise and fall of a price of a specific good because of supply and demand. It is when prices rise across the economy.

The Federal Reserve tries to maintain a steady 2-3% rate of inflation.

Effects of Inflation on Economy

People can lose money in investments when money value drops. Their original investment value decreases. Ex: CD’s, bonds, retirement funds.

The purchasing power of a dollar decreases. This could effect retirees who receive a fixed

amount of money each month. They pay for the same things every month, but the prices are raising without an increase in pay.

Deflation

When the prices of goods or services go down. This can be caused by a spending decrease in either government or personal spending.

Prices go down profits go down factories close jobs are lost depression.

Central banks try to avoid deflation by increasing the supply of money, which creates inflation.

Types of Inflation Demand Pull Inflation

Demand pull inflation occurs when there is a large demand for the product but not enough supply so prices increase across the board

Ex. Gas stations use demand pull inflation when they raise gas prices to keep supply when they are getting low

Cost Push Inflation

Cost Push inflation means that the prices have been pushed up by cost increases of the Factors of Production

Ex. It costs more to make a sweater by a company because of an increase of cotton prices or labor, so to make profit, the company raises the prices of the sweater

Hyperinflation A very rapid and out of

control increase in another country’s or the United States inflation rate.

Ex. If a country accidentally printed double the money and it got to consumers, then businesses would double their prices because each dollar would only be worth ½ of a dollar.

Hyperinflation Is normally caused when there is an imbalance in the supply and demand of money.

Consumer Price Index

Measures the change of price of the same “basket” of goods over time.

1993

•Eggs•Milk•Flour•Bread$12.00

2013

•Eggs•Milk•Flour•Bread$15.00

Inflation Rate The rate at which the

prices of something change at a certain rate depending on the amount of money in circulation

Most country’s goal for inflation is 2-3% per year and the inflation rate is controlled by the government or central bank

Ex. A soccer ball costs $10.00 and over the next year the inflation rate is 2% so in a year the soccer ball costs $10.20

Original Price: $1.00

One Year Later:$1.02

Two Years Later:$1.04

Inflation rate of 2% over 2 years

Standard of Living Standard of Living is the wealth, material goods, comfort and

necessities that are available from a certain geological area. It can be used to compare both geological areas and different

distinct times Factors could be:

Income Employment availability House affordability Poverty rates Inflation rate Life expectancy Economic and political stability

VS.

Different Times Example:America has greatly improved on its standard of living from a century ago. The items that were once luxury are now widely available, life expectancy have increased, and annual work hours have decreased.

Price Stability

Occurs when there is no inflation or deflation, it is STABLE and predictable.

Works Cited

http://www.investopedia.com/terms/i/inflation.asp

http://www.investopedia.com/terms/d/deflation.asp

http://www.investopedia.com/terms/c/consumerpriceindex.asp

http://www.economicsonline.co.uk/Managing_the_economy/Stable_prices.html