Inflation
Inflation: a general rise in the price level
every February of the year, prices rise
general rise
Inflation Rate Formula = (new price index - old price index) / (old price index) X 100
CPI / Consumer Price Index: measures the cost of a market basket of goods of a typical urban American family
Market basket of goods
- never 1 item by itself, always more than 1
CPI formula= cost of market basket of goods in a given year / cost of market of goods in the next year X 100
every February of the year, prices rise
general rise
Inflation Rate Formula = (new price index - old price index) / (old price index) X 100
CPI / Consumer Price Index: measures the cost of a market basket of goods of a typical urban American family
Market basket of goods
- never 1 item by itself, always more than 1
CPI formula= cost of market basket of goods in a given year / cost of market of goods in the next year X 100
May it be noted that there are three main causes of inflation. The first one is when the government prints too much money. The second is demand-pull inflation, which describes when too many dollars chase too few goods. In this case, the government keeps printing money to pay debt, resulting in hyperinflation. The third is cost-push inflation, which describes when higher production cost increases prices.
ReplyDeleteFor inflation, it's important to note that there are different effects of unanticipated inflation. There are those who are hurt, helped, and unaffected by unanticipated inflation. Often times, people that are hurt by inflation are lenders/creditors, people on a fixed income, and savers. People who are helped by inflation include borrowers, debtors, and flexible income people. Lastly, people unaffected by inflation are those who receive am ARM (adjustable rate market) or those that have a salary, pension/retirement, or society security that receives COLA.
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