Introduction to inflation

consumer price index
 Measures the market basket of goods for a typical american family
Formula: cost of market basket in a year/cost of market basket in a base year
 x 100.

• Real GDP is adjusted for inflation
• Inflation -general rise of a price level
• Deflation general fall of the price level

Rate of inflation
CPI2-CPI1/CPI1 x 100
 New minus old over old

Types of inflations

• cost push inflation- higher production of cost which increase prices
• demand pull inflation-too many dollars chasing too few goods
• political panics- recession or depression

Inflation help

• Debtors

Inflation hurt

• lenders
• savers
• people with fixed wages