INFLATION MADE EASY

POWERPOINT PRESENTATION

Inflation: A Lesson Plan

By Paul C. LohrED 639

Dr. HelmsOctober 23, 2002

Rationale Social Studies topic of Economics. Lesson plan adheres to Ohio

Content Standards 2002 draft requirements for 11th grade students.

In depth study and working knowledge of U.S. Government and Economy.

Objective The students will understand the

role of money as a medium of exchange.

The students will understand how the quantity of money in circulation impacts the general price level.

Assessment Students will demonstrate

understanding of the concept with: In class discussion. In class essay worksheet. Essay homework assignment. Small group economic model story

problems. 90% of students correct (goal @ 100%).

Class Exercises 1. Money, Gold & Barter Demo 2. Elephant & $1.00 Demo 3. Elephant & $2.00 Demo 4. 1st CD Shopping Exercise 5. 2nd CD Shopping Exercise

ECONOMICS TODAY

Inflation and You!The Role of Money

Rising Prices = Inflation

Why Use Money?

Barter ….…(Trade Things) Precious Metals ….…(Gold) Fiat Money…….(Currency)

Barter, Gold, Money Need 3

Volunteers #1 come on up &

get this cash #2 come on up &

get this bag of gold

#3 come on up & bring your chair

Money How does it work? Do others accept

cash all the time? For everything? How do you know

value or price of a product?

Gold (Precious Metals) Does everyone

accept it all the time?

For Everything? Is it easy to carry

around with you?

Barter Trading stuff for

other stuff… That chair you have! Will everyone

accept it for other stuff?

How easy is it to carry around?

What is the value?

Science Experiment Lab Experiment Mix two

ingredients in a test tube: Money Product

Cook up some inflation

Spending Habits Law of gravity

Predictable Absolute

“Law” of consumption MPC Marginal

Propensity to Consume

People spend 97% of money available

Economic Stew Recipe:

Add $1 to test tube Add 1 elephant to test tube Stir and heat This is a mini-economy mixture Pour into pie plate Sample to taste

Our Entire Economy Produces one elephant Has one dollar in circulation What is the price of the elephant? Hint:

All the money always gets spent… Nothing to buy except the one

elephant..

Price of the Elephant is……

Now We Create Inflation Take test tube Add one elephant Add $2 Stir & heat Pour into pie plate Sample to taste

Price of the Elephant is….

More Dollars Chasing Fewer Goods = Monetary Inflation

Let’s Go Shopping…. Let’s see how this

works in real life. Shopping for your

favorite music CD And see inflation

happen…right before your eyes!

1st Shopping Exercise $1000 distributed among students 20 Music CDs to buy Average CD price = $ 50

2nd Shopping Exercise $2000 distributed among students 20 Music CDs to buy Average CD price = $100

Class Discussion Results of shopping? What happened to CD prices? Why? If only $500 used for 2nd

shopping… What would average CD price be? Why?

Website References http://www.frbsf.org http://www.cnie.org/nle/info-14htm

l http://www.axiomatic.net/ragnar/p

df/chart.pdf http://www.econlit.org/elsube.html http://www.karlshell.com/course.ht

ml http://www.clev.frb.org/Research/r

eview98/madison.pdf

End of PowerPoint Presentation