CH. 12 PT.1

Inflation:

When prices go up on things you usually buy.

How do we measure prices?

CPI, GDP deflator , PPI

CPI

Consumer Price Index, checks prices of things ppl buy often. Ex: gas, food, rent , clothes

GDP deflator:

Looks at prices of all finished goods and services in the whole economy

PPI

Producer Price Index, checks the prices of things companies pay to make products.

Why inflation Happens?

Bc of supply and demand

Hyperinflation;

When prices go extremely fast

Infation is measured with:

price index

P2

Current YR

P1

Last yr

Nominal Prices:

Price Tags

Real Price:

Price after adjusting Inflation