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Warm Up
Everything You Need To Know
About Inflation…
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Inflation
A gradual increase in prices over time.
The U.S. economy hopes to maintain an
annual increase in inflation at 3-4%
annually.
Creeping Inflation
Inflation at 2-3%...the U.S. has come to
expect at least this much inflation every
year.
Deflation
Although prices increase gradually over
time, there are times when prices can fall
and decrease. For example, there was a
period of deflation when prices fell over
50% during the height of the Great
Depression.
Unanticipated Inflation
Inflation at a rate which was greater than
the rate expected for that period of time.
*Creditors & individuals that live on Fixed
Income=losers!!!
*Debtors=winners!!!
Anticipated Inflation
Inflation at a rate equal to the rate
expected in that period. When inflation is
fully anticipated, there are no winners and
losers.
“COLA” (cost of living adjustment)
Most wage earners protect themselves by
having a clause in their contract where
inflation must be taken into account. If
there is higher inflation, then their income
must increase accordingly.
Hyperinflation
A very rapid rise in the price level. Prices
are rising way to fast.
Stagflation
Inflation coupled with stagnate growth
(low GDP).
Nominal Value
The value of a good or service before
inflation is taken into consideration
Real Value
The value of a good or service after
inflation is taken into account.