Inflation - Updated Inflation Tutorial http/www.investopedia.com/university/inflation Thanks very much for downloading the printable version of

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Updated 05/12/2006 Inflation Tutorial http://www.investopedia.com/university/inflation/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx Table of Contents 1) Inflation: Introduction 2) Inflation: What Is Inflation? 3) Inflation: How Is It Measure? 4) Inflation: Inflation And Interest Rates 5) Inflation: Inflation And Investments 6) Inflation: Conclusion Introduction During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for around $5,000. In the twenty-first century, bread, cars, houses and just about everything else cost more. A lot more. Clearly, we've experienced a significant amount of inflation over the last 60 years. When inflation surged to double-digit levels in the mid- to late-1970s, Americans declared it public enemy No.1. Since then, public anxiety has abated along with inflation, but people remain fearful of inflation, even at the minimal levels we've seen over the past few years. Although it's common knowledge that prices go up over time, the general population doesn't understand the forces behind inflation. What causes inflation? How does it affect your standard of living? This tutorial will shed some light on these questions and consider other aspects of inflation. (Page 1 of 7) Copyright © 2006, Investopedia.com - All rights reserved.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Investopedia.com – the resource for investing and personal finance education. What Is Inflation? Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. The value of a dollar does not stay constant when there is inflation. The value of a dollar is observed in terms of purchasing power, which is the real, tangible goods that money can buy. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year. After inflation, your dollar can't buy the same goods it could beforehand. There are several variations on inflation: Deflation is when the general level of prices is falling. This is the opposite of inflation. Hyperinflation is unusually rapid inflation. In extreme cases, this can lead to the breakdown of a nation's monetary system. One of the most notable examples of hyperinflation occurred in Germany in 1923, when prices rose 2,500% in one month! Stagflation is the combination of high unemployment and economic stagnation with inflation. This happened in industrialized countries during the 1970s, when a bad economy was combined with OPEC raising oil prices. In recent years, most developed countries have attempted to sustain an inflation
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/17/2010 for the course BUS 001 taught by Professor Gra during the Spring '99 term at American University in Cairo.

Page1 / 7

Inflation - Updated Inflation Tutorial http/www.investopedia.com/university/inflation Thanks very much for downloading the printable version of

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online