Life With Inflation To identify who is hurt and helped by inflation.
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Transcript of Life With Inflation To identify who is hurt and helped by inflation.
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Life With Inflation
To identify who is hurt and helped by inflation
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Inflation General increase in the price level of goods
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Inflation General increase in the price level of goods
However, this is an estimate, as some goods could actually decrease, but others rise
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Consumer Price Index (CPI) Tool for measuring inflation
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Consumer Price Index (CPI) Tool for measuring inflation
Survey 21,000 stores then compare them to a base year
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Consumer Price Index (CPI) Tool for measuring inflation
Survey 21,000 stores then compare them to a base yearThe base year is given an index value of 100 and the
this year is totaled and compared
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Consumer Price Index (CPI) Tool for measuring inflation
Survey 21,000 stores then compare them to a base yearThe base year is given an index value of 100 and the
this year is totaled and comparedIf this year receives a 115, then inflation is 15%
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Types of Inflation Demand-Pull Inflation – there is a shortage of
goods (high demand)
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Types of Inflation Demand-Pull Inflation – there is a shortage of
goods (high demand)This is a good sign that the economy is doing well
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Types of Inflation Demand-Pull Inflation – there is a shortage of
goods (high demand)This is a good sign that the economy is doing wellOften times, this inflation is found in times of war
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Types of Inflation Demand-Pull Inflation – there is a shortage of
goods (high demand)This is a good sign that the economy is doing wellOften times, this inflation is found in times of war
Cost-Push Inflation – prices go up b/c of an increase in the costs of production
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Who Wins? Who Loses?
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Who Wins? Who Loses? Hurt:
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Who Wins? Who Loses? Hurt:
Those with a fixed income
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Who Wins? Who Loses? Hurt:
Those with a fixed incomeCreditors, or those who have loaned money
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Who Wins? Who Loses? Hurt:
Those with a fixed incomeCreditors, or those who have loaned money
When repaid a loan, their $ buys less
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Who Wins? Who Loses? Hurt:
Those with a fixed incomeCreditors, or those who have loaned money
When repaid a loan, their $ buys lessBusiness activity
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Who Wins? Who Loses? Hurt:
Those with a fixed incomeCreditors, or those who have loaned money
When repaid a loan, their $ buys lessBusiness activity
People may buy less
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Who Wins? Who Loses? Hurt:
Those with a fixed incomeCreditors, or those who have loaned money
When repaid a loan, their $ buys lessBusiness activity
People may buy lessIf inflation goes up, so do interest rates, meaning businesses
will take out fewer loans
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Who Wins? Who Loses? Helped:
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Who Wins? Who Loses? Helped:
Debtors, people who have borrowed money
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Who Wins? Who Loses? Helped:
Debtors, people who have borrowed moneyHigher inflation means higher wages which means that they
can pay off previous loans easier
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