1. Consumer Price Index

2. Definitions and Uses Used to measure economic stability – Most commonly used to measure inflation Definition: Measure of change in the average price of consumer goods and services. – Usually given as an index number CPI this year – CPI last year = CPI index number CPI last year

3. Measuring CPI Consists of a Market Basket of goods and services that consumers typically buy – major categories include: housing, food, transportation, entertainment, apparel, medical care, household furnishings.

4. Types of Inflation Demand-Pull Inflation – Consumer Demand for products and services Pulls prices upward. demand increases, prices increase decreased demand pulls prices downward Great Depression caused by demand pull

5. Cost-Push Inflation – Increased costs of resources push prices upward 1970’s oil embargo, corn in 2010’s Push-Pull Inflation – combination of demand and supply Wage-price spiral – prices increase causes wages to increase, resource cost increase causes prices to increase causing wages to increase…. What type of Inflation is shown here?

6. Wage Price Spiral

7. IF PRICES DON’T RISE, IS THERE INFLATION? If portions shrink but prices stay the same, you have inflation. This happened in the last economic downturn.