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Response QuestionTalk to the person next to you compare what you came
up with for the following questions.
What is inflation?
What causes inflation?
Does the US have an inflation problem today?
How did you answers differ?
How did you determine which answer was right?
Write down the best answers on a single sheet.
Inflation
Inflation: an increase in the price level, or avg
price of goods.
Inflation effects Purchasing power, the ability to buy goods is decreased with rising
prices.
Inflation Rate is the percentage of change in price over time.
Three theories of why inflation happensQuantity Theory
Too much money in the economony causes inflation
to stop it increase the money supply at
the same rate the economy grows.
Cost Push Theory
When Producers raise prices to meet
increased costs.
This can cause wage spiral. Wages
increase lead to higher prices and
thus higher wages.
Demand Pull Theory
inflation occurs when demand for a
good exceeds supply
What does inflation affect?Purchasing Power
high inflation would mean the dollar you have cannot buy as
much.
Interest Rates When inflation rate
exceeds a banks interest rate you are
actually losing money.
Income If your income does
not increase each year with the inflation rate
each year you lose money.
To determine whether there is
inflation the Consumer Price
Index, or CPI is used.
CPI: The price of an average basket of goods compared with the same basket one month or year earlier.
A high increase in CPI indicates higher inflation.
In your response section answer the follow 4 questions
1. Inflation is
(a) the process by which rising wages cause higher prices.
(b) the price increase of a typical group of goods.
(c) a general increase in prices.
(d) the ability to purchase goods and services.
2. Too much money in the economy is the cause of inflation according to
(a) the quantity theory.
(b) the demand-pull theory.
(c) the quantum theory.
(d) the cost-push theory.
3. Explain how inflation effects us personally.
4. How is CPI determined?
How Coca Cola wen unaffected by inflation for 70
years.
So why wasn’t Coca Cola not affected by inflation when everything else around it was?
Can you think of anything else that’s been the same price for a long time?
Was Coca Cola finally affected by inflation? How/why?
Find it at mrcostanzo.us
Find it at mrcostanzo.us
Find it at mrcostanzo.us