1. Inflation: -Students will understand what economics looks at when evaluating price changes over time. -Students will understand what causes inflation. -Students will understand how inflation is measured, and how it affects the overall U.S. economy. Bell Ringer: What comes to mind when you hear the term inflation?

2. Price Fluctuations Aggregate Supply: The total amount of goods and services produced throughout the economy. Aggregate Demand: Total amount of spending by individuals and businesses throughout the economy. Inflation: An increase in the average price level of all products in an economy. Deflation: A decrease in the average price level of all goods and services in an economy.

3. Causes of Inflation Demand-Pull Inflation: When Aggregate demand increases faster than the economy’s productive capacity. Cost-Push Inflation: Producers raise prices to cover higher resource cost. Price Expectation: What consumers expect market prices to do.

4. Measuring Inflation Consumer Price Index: Measure of the average change over time in the price of a fixed group of products. Producer Price Index: The average change over time in the prices of goods and services bought by producers.

5. Homework: Note the Effects of Inflation Page 263  Questions 1, 2, 3, 4