INFLATIONvs

DEFLATION

… the fiction of money’s value

Why is money’s value fiction?

•Economics is organic•Laws of Supply & Demand•Perceived value/worth•Inflation & Deflation

•Definition 1 = The buying and selling of stuff

•Definition 2 = The study of the production, distribution and consumption of goods and services

•Economics is linked to:

Supply & Demand

WHAT IS ECONOMICS ?= Study of Commerce

SUPPLY & DEMAND

Supply Demand0

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2

3

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Surplus

Supply Demand0

1

2

3

4

Equilibrium

Supply Demand0

1

2

3

4Shortage

Inflation vs Deflation

•Inflation – increase in prices of goods or services over time (Video 2 )

•Deflation – decrease in prices of goods or services over time

Inflation causes prices to increase, because the value of money decreases

Hyperinflation•Hyperinflation –

extreme or out of control inflation

•World Inflation/Deflation rates link

Deflation

•Deflation – decrease in prices of goods or services over time

Which is worse?

Why is Deflation Worse?

Handout Questions/Definitions

1. Inflation makes the value of money go up/down

2. Deflation makes the value of money go up/down

3. Inflation makes getting a job easier/harder/has no effect

4. Deflation makes getting a job easier/harder/has no effect

5. Which is easier to control: Inflation/Deflation

6. Which is generally more serious: Inflation/Deflation

7. Because: (Deflationary Spiral)

8. Inflation is good for someone Selling/Buying

9. Deflation is good for someone Selling/Buying