1. Banking on Inflation Understanding Inflation http://www2.scholastic.com/content/collateral_resources/pdf/a/Actuarial_Fa mact2_BankingonInflation.pdf

2. INFLATION: What is it? Inflation is: a general increase in the price of goods and services.

3. Inflation from 1960 to 2005

4. Example: Hurricane Andrew Hurricane Andrew and Inflation: “Hurricane Andrew affected Florida, Lousiana, and Mississippi in 1992. In 1992, the estimated cost of the hurricane was $15.5 million. Because of inflation, that amount was equal to approximately $21.6 million in 2005.”

5. Finding Percent of Change  Take the difference between the 2 prices.  Divide by the original amount. This will give you a decimal answer.  To change to a percent multiply by 100.

6. Question 1:  How much more did a house cost in 2000 than in 1970?  $207,000 - 26,600 = $180,400.  What’s the percentage increase?  180,400/26,600 = 6.78 * 100 = 678%

7. Questions 2  How did the price of gas change from 1980 to 1990?  $1.16 - $1.25 = -.09, the price decreased by $.09.  What’s the percentage change? .09/1.25 =.072 * 100 = 7.2%

8. Question 3  What did a gallon of milk and a dozen eggs cost in 1960?  Milk ($.49) and Eggs ($.57), Total = $1.06  In 2005?  Milk ($3.74) and Eggs ($1.35), Total = $5.09  By what percentage did the cost increase?  $4.03/$1.06 = 3.80 * 100 = 380%

9. Inflation since 2005 Inflation tables from 2000 to currently can be seen on the below website.  http://inflationdata.com/Inflation/Inflation _Rate/CurrentInflation.asp http://inflationdata.com/Inflation/Inflation _Rate/CurrentInflation.asp  Consumer Price Index:  ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.t xt ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.t xt

10. Question 4  Based on inflation, what would you estimate the price of a gallon of gas will be when you get your driver’s license?  First determine what year you will get your license, then review the percent of inflation we noticed on the previous website and make your best determination.  What, besides inflation, might affect the price?  Availability of gas  Demand for gas  Population increasing or decreasing  Hybrid cars  United States relationship with the middle east.