Life With Inflation

To identify who is hurt and helped by inflation

Inflation General increase in the price level of goods

Inflation General increase in the price level of goods

However, this is an estimate, as some goods could actually decrease, but others rise

Consumer Price Index (CPI) Tool for measuring inflation

Consumer Price Index (CPI) Tool for measuring inflation

Survey 21,000 stores then compare them to a base year

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

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%

Types of Inflation Demand-Pull Inflation – there is a shortage of

goods (high demand)

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

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

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

Who Wins? Who Loses?

Who Wins? Who Loses? Hurt:

Who Wins? Who Loses? Hurt:

Those with a fixed income

Who Wins? Who Loses? Hurt:

Those with a fixed incomeCreditors, or those who have loaned money

Who Wins? Who Loses? Hurt:

Those with a fixed incomeCreditors, or those who have loaned money

When repaid a loan, their $ buys less

Who Wins? Who Loses? Hurt:

Those with a fixed incomeCreditors, or those who have loaned money

When repaid a loan, their $ buys lessBusiness activity

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

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

Who Wins? Who Loses? Helped:

Who Wins? Who Loses? Helped:

Debtors, people who have borrowed money

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