Inflation- is a general rising level of prices
Purchasing power - The amount of good and services that money buys
Ideal inflation rate: 2-3 %
Three causes of Inflation
- Printing to much money
- Demand pull inflation- “too many dollars chasing too few goods”/ Demand pulls up prices Demand increases but supply stays the same. The results is a shortage driving prices
- Cost- Push Inflation Higher production costs increase prices
(Current year price index – the base year price index / price year index) * 100
Deflation- it is a decline in the general price level
Disinflation- it occurs when the inflation itself declines
The rule of 70
It is used to calculate the number of years it will take for the price level to double at any given rate of inflation
(70/ annual rate of inflation)
Real interest rate
The amount of money borrowed
The percentage increasing purchasing power that a borrower pays to the lender. ( adjusted for inflation)
Real= nominal interest rate – expected inflation
Nominal Interest rate
The percentage increase in money that the borrower pays back to the lender not adjusting for inflation
VIDEO BELOW SHOULD GIVE A REVIEW OVER THE NOTES TAKEN IN CLASS
A nice overview of inflation as a whole, good to review. The chart and video were very helpful.
ReplyDeleteI like the fact that you included a video in your blog. It's something I have not seen a lot of people do with their blogs. The t-chart is in depth as well. The formatting needs a little work though.
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