Inflation INCREASE IN THE GENERAL LEVEL OF PRICES AND SERVICES WHEN PRICES ARE RISING FASTER THAN INCOME, BUYERS LOSE PURCHASING POWER CONSUMERS MAKE CHOICES AND SPEND MONEY, AFFECTING PRICES AND INFLATION

MEASURING INFLATION MEASURED BY THE GOVT CONSUMER PRICE INDEX (CPI) – USES A LIST OF GOODS AND SERVICES THAT ARE COMMONLY BOUGHT BY CONSUMERS IF A PRICE OF AN ITEM WAS $1.00 IN THE BASE YEAR AND IT’S NOW $1.12, THAT IS A 12% INCREASE IN PRICE

INFLATION VS. PURCHASING POWER AS INFLATION RISES, THE TRUE PURCHASING POWER OF EACH DOLLAR FALLS. THAT MEANS YOU MUST EARN MORE TO MAINTAIN THE SAME STANDARD OF LIVING. IF YOU DO NOT EARN MORE, STANDARD OF LIVING DECREASES COST OF LIVING ADJUSTMENTS – (COLA) SOME EMPLOYERS PAY INCREASES TO THEIR WORKERS TO KEEP PACE WITH INFLATION; KEEPS PURCHASING POWER TO EQUAL TO RISING COSTS.

DISINFLATION OCCURS WHEN PRICES ARE RISING, BUT THE RATE OF INCREASE IS SLOWING DOWN. SOME PRODUCTS AND SERVICES DO NOT INCREASE IN PRICE AS FAST AS OTHERS OCCURS WHEN DEMAND FOR A PRODUCT IS NOT THE SAME THROUGHOUT THE YEAR EX: A/C’S IN WINTER PERIOD OF SLOWING INFLATION

REFLATION OCCURS WHEN HIGH PRICES ARE LOWERED TO DECREASED DEMAND, BUT THEN RESTORED TO THE PREVIOUS HIGH LEVEL. reflation may be defined as inflation deliberately undertaken to relieve a depression OCCURS WHEN THE AVAILABLE SUPPLY OF A PRODUCT SUCH AS OIL GOES UP AND DOWN. WHEN CONSUMERS TEMPORARILY STOP BUYING A PRODUCT OR SERVICE AND THEN FOR SOME REASON START BUYING IT AGAIN EX: GAS PRICES & TRUCKS

HYPERINFLATION RAPIDLY INCREASING PRICES THAT ARE OUT OF CONTROL EFFECTS CAN BE DEVASTATING AS CONSUMERSSPEND THEIR MONEY AS FAST AS THEY CAN IN FEAR THAT IF THEY WAIT PRICES WOULD BE EVEN HIGHER – THIS SPENDING RESULTS IN MORE HYPERINFLATION AS A RESULT PEOPLE ARE UNABLE TO BUT THE GOODS THAT THEY NEED TO LIVE COMFORTABLY

Hyperinflation in Zimbabwe From 2007 to 2009, inflation spiraled out of control at an almost unimaginable rate. Zimbabwe's hyperinflation was a result of political changes that led to the seizure and redistribution of agricultural land, which led to foreign capital flight (when assets or money rapidly flow out of a country, due to an event of economic consequence) At the same time, Zimbabwe suffered a terrible drought that combined with the economic forces to virtually guarantee a failed economy. Zimbabwe's leaders attempted to solve the problems by printing more money, and the country quickly descended into hyperinflation that at its peak exceeded 79 billion% per month.

Hyperinflation in hungary The worst hyperinflation ever recorded took place in Hungary in 1946 at the end of World War II. As in Germany, the hyperinflation that occurred in Hungary was a result of a requirement to pay reparations for the war that had just ended. Economists estimate that the daily inflation rate in Hungary during this period exceeded 200%, which equates to an annual inflation rate of more than 13 quadrillion%. During this period, prices in Hungary doubled every 15 hours. Inflation of the Hungarian currency was so out of control that the government issued an entirely new currency for tax and postal payments. Officials announced the value of even that special-use currency on a daily basis due to massive fluctuations. By August of 1946, the total value of all Hungarian bank notes in circulation was valued at one-tenth of a United States penny.

DEFLATION DECREASE IN THE GENERAL LEVEL OF PRICES OPPOSITE OF INFLATION PRODUCERS ARE WILLING AND ABLE TO PROVIDE GOODS AND SERVICES AT LOWER PRICES, BUT DUE TO CERTAIN EVENTS CONSUMERS ARE BUYING LESS

PRODUCTIVITY IS A MEASURE OF THE EFFICIENCY WITH WHICH GOODS AND SERVICES ARE MADE COMPARES TOTAL OUTPUT (QUANTITY OF GOODS OR SERVICES PRODUCED) TO TOTAL INPUTS , (RESOURCES USED, SUCH AS LABOR, LAND, OR EQUIPMENT) WHEN INPUT COSTS, SUCH AS WAGES OR THE COST OF NEW EQUIPMENT ARE OFFSET BY HIGHER OUPUT SUCH AS LARGER QUANTITIES OF A PRODUCT, PRODUCTIVITY RISES. HIGHER PRODUCTIVITY LOWERS THE COST OF EACH UNIT PRODUCED. LOWER COSTS ENABLE THE PRODUCER TO MAINTAIN THE SAME PRICE LEVELS. IN THIS CASE, COST PUSH INFLATION (RISING PRICES AS A RESULT OF RISING PRODCUTION COSTS) DOES NOT OCCUR ; MORE PRODUCTS ARE MADE AT THE SAME PRICE LEVEL.

Measuring productivity You can measure employee productivity with the labor productivity equation: total output / total input.  Let’s say your company generated $80,000 worth of goods or services (output) utilizing 1,500 labor hours (input). To calculate your company’s labor productivity, you would divide 80,000 by 1,500, which equals 53. This means that your company generates $53 per hour of work.

Measuring productivity (Cont’d) Let’s say your company generated $80,000 worth of goods or services in one week with 30 employees. You would divide 80,000 by 30, which equals 2,666 (meaning each employee produced $2,666 for your company per week).