Response QuestionTalk to the person next to you compare what you came

up with for the following questions.

What is inflation?

What causes inflation?

Does the US have an inflation problem today?

How did you answers differ?

How did you determine which answer was right?

Write down the best answers on a single sheet.

Inflation

Inflation: an increase in the price level, or avg

price of goods.

Inflation effects Purchasing power, the ability to buy goods is decreased with rising

prices.

Inflation Rate is the percentage of change in price over time.

Three theories of why inflation happensQuantity Theory

Too much money in the economony causes inflation

to stop it increase the money supply at

the same rate the economy grows.

Cost Push Theory

When Producers raise prices to meet

increased costs.

This can cause wage spiral. Wages

increase lead to higher prices and

thus higher wages.

Demand Pull Theory

inflation occurs when demand for a

good exceeds supply

What does inflation affect?Purchasing Power

high inflation would mean the dollar you have cannot buy as

much.

Interest Rates When inflation rate

exceeds a banks interest rate you are

actually losing money.

Income If your income does

not increase each year with the inflation rate

each year you lose money.

To determine whether there is

inflation the Consumer Price

Index, or CPI is used.

CPI: The price of an average basket of goods compared with the same basket one month or year earlier.

A high increase in CPI indicates higher inflation.

In your response section answer the follow 4 questions

1. Inflation is

(a) the process by which rising wages cause higher prices.

(b) the price increase of a typical group of goods.

(c) a general increase in prices.

(d) the ability to purchase goods and services.

2. Too much money in the economy is the cause of inflation according to

(a) the quantity theory.

(b) the demand-pull theory.

(c) the quantum theory.

(d) the cost-push theory.

3. Explain how inflation effects us personally.

4. How is CPI determined?

How Coca Cola wen unaffected by inflation for 70

years.

So why wasn’t Coca Cola not affected by inflation when everything else around it was?

Can you think of anything else that’s been the same price for a long time?

Was Coca Cola finally affected by inflation? How/why?

Find it at mrcostanzo.us

Find it at mrcostanzo.us

Find it at mrcostanzo.us