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Inflation

Inflation. Chapter 8, Unit 4, Part IV. Inflation:. A general rising of the level of prices (not all P rise at the same rate) Rule of 70 also works for doubling time for price level Ex: How long would it take for prices to double if the inflation rate is 10%? 7 years.

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Inflation

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  1. Inflation Chapter 8, Unit 4, Part IV

  2. Inflation: • A general rising of the level of prices (not all P rise at the same rate) • Rule of 70 also works for doubling time for price level Ex: How long would it take for prices to double if the inflation rate is 10%? 7 years

  3. Causes of Inflation • Demand-Pull inflation • Spending increases faster than production • Too much money chasing too few goods • Too many consumers with ready cash or expectations for spending • Too many are employed causing wage inflation

  4. Cost-Push or Supply-Side Inflation • Prices rise because of rise in per-unit production costs • Not enough supply of goods & services • Wage-push can occur as result of union strength • Supply shocks may occur with unexpected increases in the price of raw materials • Political cuts in supply • Could cause both output and employment to decline—real income declines.

  5. Classwork—Page 157 • Questions: • 6 • 8 • 10 • 14 • 15

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