2. SOC101Y University of Toronto 2013-14 Robert Brym Online Mini-Lecture #4 Inflation Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

3. Inflation refers to an increase in the price of goods and services (and therefore a decline in the value or purchasing power of money). Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

4. In Germany from 1919 to 1923, prices rose 10 billion percent, rendering money almost valueless. Below: A 50,000,000 Deutschmark note from 1923. Right: A woman uses Deutschmarks as furnace fuel. Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

5. In Zimbabwe in November 2008, the annualized inflation rate hit 6 sextillion percent (6 sextillion is 6 followed by 21 zeros) – the highest inflation rate ever recorded. The $100,000,000,000,000 Zimbabwe bill is the highest denomination bill ever printed. This bill was purchased in Toronto in 2008 for $12 Canadian. The currency was abandoned by the government of Zimbabwe in 2009. Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

6.  Today the inflation rate in Canada is 1.1 percent per year. At this rate, it would take 64 years for the price of goods and services to double.  The Bank of Canada inflation target is 1 to 3 percent. At 2 percent, it would take 35 years for the price of goods and services to double. Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

7. September 2012 September 2013 Calculation Price of a cup of coffee $1$1.05 Inflation ratex? Purchasing power of Sept 2013 dollar in Sept 2012 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

8. September 2012 September 2013 Calculation Price of a cup of coffee $1$1.05 Inflation ratex?1.05-1.00=.05 Purchasing power of Sept 2013 dollar in Sept 2012 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

9. September 2012 September 2013 Calculation Price of a cup of coffee $1$1.05 Inflation rate5%1.05-1.00=.05 Purchasing power of Sept 2013 dollar in Sept 2012 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

10. September 2012 September 2013 Calculation Price of a cup of coffee $1$1.05 Inflation rate5%1.05-1.00=.05 Purchasing power of Sept 2013 dollar in Sept 2012 x?$1 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

11. September 2012 September 2013 Calculation Price of a cup of coffee $1$1.05 Inflation rate5%1.05-1.00=.05 Purchasing power of Sept 2013 dollar in Sept 2012 x?$1x+.05x=1.00 1.05x=1.00 x=1.00/1.05 x=.9524 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

12. September 2012 September 2013 Calculation Price of a cup of coffee $1$1.05 Inflation rate5%1.05-1.00=.05 Purchasing power of Sept 2013 dollar in Sept 2012 $0.9524$1x+.05x=1.00 1.05x=1.00 x=1.00/1.05 x=.9524 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <- Checking: 0.9524 * 1.05 = 1.0

13. Q: The inflation rate between 2011 and 2012 is 3%. The inflation rate between 2012 and 2013 is 4%. You receive a gift of $100 in 2013. You buy a pair of pants with the money. How much would the same pair of pants have cost in 2011? 2013  2012 x+.04x=100 1.04x=100 x=100/1.04=96.15 A: $93.35 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

14. Q: The inflation rate between 2011 and 2012 is 3%. The inflation rate between 2012 and 2013 is 4%. You receive a gift of $100 in 2013. You buy a pair of pants with the money. How much would the same pair of pants have cost in 2011? 2013  2012 x+.04x=100 1.04x=100 x=100/1.04=96.15 2012  2011 x+.03x=96.15 1.03x=96.15 x=96.15/1.03=93.35 Check: 93.35+3%=96.15 96.15+4%=100 A: $93.35 Click icon to repeat audio Right cursor to advance -> Left cursor to go back <-

15. SOC101Y University of Toronto 2013-14 Robert Brym Online Mini-Lecture #4 Inflation END Left cursor to go back <-