PPT-Inflation An increase in the economy’s price level

The price level is the weighted average of prices A decrease in moneys purchasing power When the supply of money is growing faster than the production of goods and services Inflationwhat is it. August 2015. Costs and prices. Chart 4.1. CPI inflation expected to remain around zero over the next few months. Bank staff projection for near-term CPI inflation. (a. ). (. a) The red diamonds show Bank staff’s central projection for CPI inflation in April, May and June 2015 at the time of the May . Inflation. Inflation . is . defined. as . an . increase in the overall level of prices.. When the general price level rises, each unit of currency buys fewer goods and services. inflation is also a decline in the real value of money—a loss of . To understand what . inflation is. To identify how . inflation might . affect businesses. To evaluate how businesses might respond to . inflation. Starter: Find out how much the average salary was in . Inflation. Perfection. Deflation. 1. 2. But first a little behavioral economics. WRESTLERS . & . BASKETBALL PLAYERS!!. GO PANTHERS!!!!. INFLATION. Chapter 11, Section 2. You may have heard relatives talk about the good old days when a dollar would buy something. What happened to that dollar? Why won’t it buy as much as it did last month or last year? . Unanticipated inflation – some people are hurt; some people gain. . For example, borrowers are helped by unanticipated inflation while lenders are hurt. . However, even anticipated inflation results in costs for the economy.. Inflation – a general increase in the price level. Deflation – a general decrease in the price level. Hyperinflation – extraordinarily high inflation. (Germany 1923 – prices doubled roughly every 2 days). 09. McGraw-Hill/Irwin. Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. The Business Cycle. Alternating increases and decreases in economic activity over time. Phases of the business cycle. The claims. German labor…an 8-hour day. German households…money holdings. German . rentiers. …war bonds. Victorious allies…reparations. Disruptions to output. Strikes … 8-hour day. Altered borders . What is inflation?. Define inflation. How does it affect the economy?. a rise in the general price level. . It causes rising prices for goods and services. . It reduces purchasing power for individuals. . causes of hyper-inflation. costs of hyper-inflation. Key . Differences Between Inflation and Deflation. When . the value of money decreases in the world market, it is inflation, while if the value of money rises, then it is deflation.. Does Paper Money have any intrinsic value?. What is money then?. Why is it important?. If there was no money then we would have to barter. For barter to work – trade is said to require the . double of coincidence of wants. . . Inflation is a situation in which the general price level rises or the value of money falls.. Types of Inflation:. On the basis of the rate of increase in price level we have three types of inflation,. Money and Inflation. Rise in money supply does not equal a rise in Real GDP in the long run, since price level rises as well by the same percentage. Classical Model of Price Level . – Since money supply and price level rise together, the Real Quantity of Money (M/P) stays at the original level.