Introduction into economics

Inflation
What is inflation

 Inflation is a rise in prices, which can be translated as the decline of purchasing power over time.
 The rate at which purchasing power drops can be reflected in the average price increase of a 
basket of selected goods and services over some period of time. 
 The rise in prices, which is often expressed as a percentage, means that a unit of currency effectively buys
less than it did in prior periods.
The features of inflation

 Inflation is the rate at which prices for goods and services rise.
 Inflation is sometimes classified into three types: demand-pull inflation, cost-push inflation, and built-in
inflation.
 The most commonly used inflation indexes are the Consumer Price Index and the Wholesale Price Index.
 Inflation can be viewed positively or negatively depending on the individual viewpoint and rate of change.
 Those with tangible assets, like property or stocked commodities, may like to see some inflation as that
raises the value of their assets.
Types of inflation

 Demand-Pull Effect
 Cost-Push Effect
 Built-in Inflation
Pro and con

 Pros:
 Leads to higher resale value of assets
 Optimum levels of inflation encourages spending
 Cons:
 Buyers have to pay more for products and services
 Impose higher prices on economy
 Drives some prices up first and others later

https://www.youtube.com/watch?v=XNu5ppFZbHo
Inflation in real life

 Optimal range of inflation?

 1-3%
 Who, how and why can control it?
 Central banks (FED) through the „money
printing process”.
 Price stability—or a relatively constant level
of inflation—allows businesses to plan for the
future since they know what to expect. 
 https://www.investopedia.com/ask/answers/
07/central-banks.asp
Hyperinflation

 Printing money without end leads to: HYPERINFLATION

 https://www.youtube.com/watch?v=VnC_L0oEFgY