1. Economic Cycles The fluctuation of a capitalist economy
Divided into two main categories:
Growth / Booms are associated with a strong and growing economy
Increased employment, increased purchasing and investment, and moderate inflation
Recessions are characterized by decreased economic growth
Rising unemployment, decreased purchasing and investment

2. Economic Cycles

3. The law of supply and demand
Prices in a capitalist economy are determined by the law of supply and demand.
Supply and demand: the quantity of a product available at a given price + the level of consumer desire for that product
The shift between supply and demand affects prices – causing inflation or deflation

4. Supply and Demand So easy even monkeys can do it.

5. INFLATION AND DEFLATION
The value of a dollar does not stay the same. The actual value of a dollar is judged by the amount of a product that can be bought.

6. Inflation
The rate at which the price for goods and services rises; causes the purchasing power of a dollar to fall.
As inflation occurs, every dollar will buy a smaller percentage. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year.
During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for $5,000.
Slow and steady inflation is a good thing since it represents a growing economy
The more products being purchased, the more jobs there will be in retail and manufacturing

7. Causes of Inflation
Demand-Pull Inflation - "too much money chasing too few goods." If demand is growing faster than supply, prices will increase.
Example: when a new video game system is first released, the price skyrockets (people sell it on Ebay for double or triple the price). As more product is available, the price decreases.
Cost-Push Inflation - When a company’s costs go up, they increase prices to maintain profit margins.
Example: When the price of a barrel of oil increases, gas prices increase.

8. Deflation
A general decline in prices, often caused by a reduction in the supply of money
Too much product and not enough money
A reduction in government, personal or investment spending all lead to less money in the economy
Causes increased unemployment since there is a lower level of demand in the economy.

9. INFLATION CALCULATOR http://146.142.4.24/cgi-bin/cpicalc.pl
Better website! Has current information on US inflation rate
Massive inflation?!!!
Current inflation rate: