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Published bySusanna Osborne Modified over 9 years ago
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Today’s Warm Up Answer on your warm up/exit ticket sheet Reed, go see the nurse. – What is the Misery Index and how is it calculated? – What do you think causes inflation? Take out your class notes
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What is Inflation? During an expansionary phase of the business cycle, the possibility of inflation exists This overall increase in price levels affects households, businesses, and gov’t differently
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Impact on Real Purchasing Power When the inflation rate rises above 3%, real purchasing power in the economy declines for many people. A candy bar cost how much?!?! Back in my day $1.00 could buy me 100 candy bars!!!
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What Causes Inflation? Demand-Pull Economy is overheated! “Too much money is chasing too few goods.” Incomes are higher than the amount of goods and services available so prices rise Example: Wynn Bucks!!! Cost Push Costs of productive resources rise, pushing up the cost of production. Producers cut back on the amount they can supply so prices for the final g/s rise
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Winners & Losers Losers Savers! – Value of savings declines if the interest rate received does not stay ahead of the inflation rate People on fixed incomes – Income stays the same while prices rise Creditors – Paid back in dollars that will buy less than when the money was lent Winners! Borrowers! – g/s received at lower price & paid back in dollars worth less People whose income rises faster than the inflation rate gain People whose assets increase in value faster than the inflation rate
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Log on… http://mswynnworldhistory.wikispaces.com Click on Economic Misery & Presidential Election
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Compare/Contrast: Cost Push vs. Demand-Pull
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