Inflation
Changes in Pricing
Price Comparisons
• 1936 - $1989
• 2010 - $30,171
• 2012 - $110,000
• 1969 - $3714
• 2012 - $22,467
• Mint - $67,700
•
•
•
•
1987 - $64.99
2012 - $126.63
In Box - $500
Respectively - $33.13
Inflation
• Increase on average level of prices over time
$
AS
Average
Level of
Prices
AD
Total G/S
GDP/GNP
Q
Rate of Inflation
• Comparing the CPI of a base year to CPI of other
years
%
= A – B x 100
A
• 2-4 % is normal and good
• Deflation – decrease in the average level of
prices
Types of Inflation
• Creeping Inflation
▫ Low inflation for a long period of time
• Chronic Inflation
▫ Inflation steadily rising over a long period of time
• Hyperinflation
▫ Out of control
▫ 1000%
Theories
• Quantity
▫ Too much money in the economy
▫ More dollars are printed than the country’s worth
• Demand –Pull
▫ Consumer demand is too high
• Cost-Push
▫ Costs of production decrease supply
▫ Costs shifted to consumers
Demand-Pull
$
AS
E2
E
AD
Q
AD2
Cost-Push
AS2
$
AS
E2
E
AD
Q
Questions
• What should be done to combat inflation?
• Should economic growth be slowed to guard
against inflation?
• How would you stop inflation?
• Who should be responsible for this in the US?
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Inflation - SteveTesta.Net