1. INFLATION Part 1

2. Turn to the next empty page & label it: Inflation
Standard: SSema1a-d
Goals: I will be able to explain how inflation and economic growth are related.

3. INFLATION There are several different types of inflation:
Inflation: general rise in prices overtime
Deflation: general fall in prices overtime
Hyperinflation: inflation in excess of 500% per year
Stagflation: period of slow economic growth combined with inflation
Creeping inflation: relatively low rate of inflation; about 1-3% annually
Types of inflation

4. Base Year: year that is the basis of comparison
INFLATION
Types of inflation
Market Basket: selection of goods & services that are commonly purchased by consumers (about 364 items)
Consumer Price Index (CPI): used to measure price changes of the market basket
Base Year: year that is the basis of comparison

5. INFLATION CPI= Inflation = Rate Types of inflation
Total Cost of Market Basket this Period
Total Cost of Market Basket Base Period
CPI (this period)- CPI(previous period)
CPI(previous period)
CPI=
X 100
Inflation
Rate =
X 100

6. Using the CPI Formula, determine the CPI.

7. Using the CPI Formula, determine the CPI.
BASE YEAR:
CPI= $1, x100
$1,792.00
CPI= 1 x 100 = 100%

8. 1. What is the inflation rate from the base year to 1998?
2. What is the inflation rate from the base year to June 2003?
3. What is the inflation rate from 1998 to 2003?
63%
83.7%
12.7%--This means that from 1998 to 2003 prices have increased 12.7%