econ 104 test 2 notes

econ 104 test 2 notes - Inflation + Economy Real estate...

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Inflation + - Economy Hurts savings Real estate Fixed incomes borrow economy Does encourage exports Purchasing power taxes Early to mid 70’s we had high inflation $10,000 in 1972 you’d be doing well; 7% interest with 10% inflation, you’d be getting ripped off Inflation detracts from earning power of savings COLA Cost of living adjustment Inflation- sustained increase in prices 1973 – 1982 high levels of inflation 8.75% Rule of 70: How long it will take prices to double % 70 = double CPI: consumer price index = CPI2007 prices2007prices1982 through 1984 x 100 - = - CPI2007CPI82 84 Price2007Price82 84 House in 1972 bought for $28,500 Someone offered $128,500 Would it be a good decision depending on inflation? = CPI72CPI2007 Price72Price2007 . . = , 41 8249 5 28 500x x= 170, 115 Or Real- adjusted for inflation Real wage
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Year Wage CPI (1982-1984) 1983 17,000 99.6 17,068 1995 29,000 152.4 19,029 2000 34,000 172.2 19,744 2007 40,000 210 19,048 Full employment – between 4-5% unemployment
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This note was uploaded on 05/20/2008 for the course ECON 104 taught by Professor Lupher during the Winter '08 term at Ohio University- Athens.

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econ 104 test 2 notes - Inflation + Economy Real estate...

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