1. Inflation Changes in Pricing

2. Price Comparisons 1936 - $1989 2010 - $30,171 2012 - $110,000 1969 - $3714 2012 - $22,467 Mint - $67,700 1987 - $64.99 2012 - $126.63 In Box - $500 Respectively - $33.13

3. Inflation Increase on average level of prices over time Average Level of Prices Total G/S GDP/GNP Q $ AS AD

4. Rate of Inflation Comparing the CPI of a base year to CPI of other years 2-4 % is normal and good Deflation – decrease in the average level of prices % = A – B x 100 A

5. Types of Inflation Creeping Inflation ▫Low inflation for a long period of time Chronic Inflation ▫Inflation steadily rising over a long period of time Hyperinflation ▫Out of control ▫1000%

6. Theories Quantity ▫Too much money in the economy ▫More dollars are printed than the country’s worth Demand –Pull ▫Consumer demand is too high Cost-Push ▫Costs of production decrease supply ▫Costs shifted to consumers

7. Demand-Pull $ Q AS AD AD 2 E E2E2

8. Cost-Push $ Q AD AS AS 2 E E2E2

9. Questions What should be done to combat inflation? Should economic growth be slowed to guard against inflation? How would you stop inflation? Who should be responsible for this in the US?