McKenna White Lindsay Gilliam Josh ish

Inflation  General increase in prices of goods and services which also leads to a decrease in the value of money.  Inflation is not just the rise and fall of a price of a specific good because of supply and demand. It is when prices rise across the economy.  The Federal Reserve tries to maintain a steady 2-3% rate of inflation.

Effects of Inflation on Economy  People can lose money in investments when money value drops. Their original investment value decreases. Ex: CD’s, bonds, retirement funds.  The purchasing power of a dollar decreases. This could effect retirees who receive a fixed amount of money each month. They pay for the same things every month, but the prices are raising without an increase in pay.

Deflation  When the prices of goods or services go down. This can be caused by a spending decrease in either government or personal spending.  Prices go down profits go down factories close jobs are lost depression.  Central banks try to avoid deflation by increasing the supply of money, which creates inflation.

Types of Inflation  Demand Pull Inflation  Demand pull inflation occurs when there is a large demand for the product but not enough supply so prices increase across the board  Ex. Gas stations use demand pull inflation when they raise gas prices to keep supply when they are getting low

Cost Push Inflation  Cost Push inflation means that the prices have been pushed up by cost increases of the Factors of Production  Ex. It costs more to make a sweater by a company because of an increase of cotton prices or labor, so to make profit, the company raises the prices of the sweater

Hyperinflation  A very rapid and out of control increase in another country’s or the United States inflation rate.  Ex. If a country accidentally printed double the money and it got to consumers, then businesses would double their prices because each dollar would only be worth ½ of a dollar.  Hyperinflation Is normally caused when there is an imbalance in the supply and demand of money.

Consumer Price Index  Measures the change of price of the same “basket” of goods over time Eggs Milk Flour Bread $ Eggs Milk Flour Bread $15.00

Inflation Rate  The rate at which the prices of something change at a certain rate depending on the amount of money in circulation  Most country’s goal for inflation is 2-3% per year and the inflation rate is controlled by the government or central bank  Ex. A soccer ball costs $10.00 and over the next year the inflation rate is 2% so in a year the soccer ball costs $10.20 Original Price: $1.00 One Year Later: $1.02 Two Years Later: $1.04 Inflation rate of 2% over 2 years

Standard of Living  Standard of Living is the wealth, material goods, comfort and necessities that are available from a certain geological area.  It can be used to compare both geological areas and different distinct times  Factors could be: Income Employment availability House affordability Poverty rates Inflation rate Life expectancy Economic and political stability VS. Different Times Example: America has greatly improved on its standard of living from a century ago. The items that were once luxury are now widely available, life expectancy have increased, and annual work hours have decreased.

Price Stability  Occurs when there is no inflation or deflation, it is STABLE and predictable.

Works Cited  ation.asp ation.asp  lation.asp lation.asp  nsumerpriceindex.asp nsumerpriceindex.asp  ging_the_economy/Stable_prices.html ging_the_economy/Stable_prices.html