Ethanomics: Inflation

I. A general rise in the level of prices.

II. Inflation reduces purchasing power. The things you can buy with the same amount of money.

III. She said "McDonald's and Jack in the Crack"

IV. Prices have doubled since 1982. they have sextupled since 1961

V. Causes

a. Printing too much money

b. Demand-pull inflation: too many dollars for too little goods. Excess demand over supply that raises prices.

c. Cost-push inflation: Higher production costs increases prices. Minimum wage.

VI. (((Current Year Price Index) - (Base Year Price Index))/ (Base Year Price Index))*100

VII. GDP deflator/ CPI : (nominal/real)*100

VIII. Inflation rate: (New CPI - Old CPI)/Old CPI

IX. Rule of 70

a. Used to calculate the number of years it will take to for the price level to double at any given rate of inflation.

b. 70/(Annual Inflation Rate)

X. Deflation

a. General decline in price level.

XI. Disinflation

a. Occurs when the inflation rate declines.

XII. Real interest rate the percentage increase in purchasing power that the borrower pays to the lender (adjusted for inflation).

a. Nominal - inflation rate= real

XIII. Nominal interest rate: the percentage increase in money that the borrower pays back to the lender (not adjusted for inflation).

a. Real + inflation rate= nominal

XIV. Hurt by inflation

a. Lenders

b. Savers

c. Fixed income

d. Everyone

XV. Helped by inflation

a. Borrowers

b. Debtors

Business when the price of product rises before the price of the producing it does.

Crash Course Economics #7

Ethanomics