1. Inflation

2. Inflation & Types  Inflation General increase in prices Types 1. Creeping – when inflation stays low for a long time 2. Chronic – when inflation steadily increases for a long time

3. Types cont. 3. Hyper- inflation – worst type, out of control - could go up to 500% a month - leads to economic collapse

4. Causes of Inflation  Quantity theory – too much money in the economy causes inflation

5.  Demand-pull Theory – when demand for goods/services exceeds existing supplies  Cost push theory – when producers raise prices to meet increased costs, leads to wage price spiral.

6. Effects  Purchasing Power Ability to purchase goods & services As inflation increases purchasing power decreases

7. Concerns  Hard to anticipate the costs of goods/services  Lose money on investments  Struggle if on a fixed income

8.  Who would most likely benefit from an unexpected 10% inflation rate? a. Alex who has $5000 in a savings account b. Maria, who has $5000 life insurance policy c. John, who loaned Angelica $5000 last year d. Angelica, who borrowed $5000 last year