# Unemployment and Inflation Pt3 Script.docx - Unemployment...

• No School
• AA 1
• 2

This preview shows page 1 - 2 out of 2 pages.

Unemployment and Inflation Pt. 3 Script Not all prices rise at the same rate, and some prices may stay constant while other prices fall. Reduced purchasing power means that each dollar of income will buy fewer items than before. The CPI measures the economy’s “market basket” of goods we all use like bread, milk, toilet paper, cell phone coverage, fuel for our cars to check if those prices are increasing, decreasing, or staying the same. This is done every month. You can also use the CPI to compare inflation from year to year. To measure inflation, subtract last year’s price index from this year’s price index and divide by last year’s index. Finally, multiply by 100 to express as a percentage. In this numerical example, using CPI data for 2014, there is a price index of 236.7 and 2013 has a price index of 233.0. You can calculate the inflation rate and find it is 1.6%. The BLS rounds to the tenths decimal place. You can also use the “Rule of 70” to do a quick calculation of the time it takes the price level to double. Divide 70 by the percentage rate of inflation and the result is the approximate number of years for the price level to double. Here the inflation rate is 1.6% so divide 70 by 1.6 and you get the number 43.75. Therefore, it would take about 44 years for prices to double at that rate of inflation. If the inflation rate is 7%, then it will take about ten years for prices to double. And hint, you may see that as a question on the practice problems or quiz.

Subscribe to view the full document.

• Fall '19

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes