Inflation and Unemployment Final

8/7/2019 Inflation and Unemployment Final

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InflationInflation andand

UnemploymentUnemploymentHow these guysHow these guys

can make yourcan make yourlife miserablelife miserable

by David Beck 2000


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What do theseWhat do thesecreatures,creatures, inflationinflation andandunemploymentunemployment, have to, have to

do withdo with moneymoney??

Lets find outLets find out


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InflationInflation is when the valueis when the valueof your money goesof your money goes


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Or down?Or down?


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Like this?Like this?


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But how can inflation beBut how can inflation be

that? Goingthat? Going downdown??Important! You see here thatImportant! You see here that

thethe valuevalue of your money isof your money isgoinggoing downdown in inflation!in inflation!

And because yourAnd because yourpurchasingpurchasingpowerpoweris less, that meansis less, that meansthatthat


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PricesPrices are goingare going

to go up!to go up!You see, with the value of theYou see, with the value of the

dollar nowdollar now lowerlower

Seller


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Sellers will now need more ofSellers will now need more ofthose dollars to make up forthose dollars to make up forthe lower value!the lower value!


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Sellers will now need more ofSellers will now need more ofthose dollars to make up forthose dollars to make up forthe lower value!the lower value!


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Therefore, prices go up,Therefore, prices go up,

and you now haveand you now have

TaTa--da!da!

Inflation!Inflation!


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So then, again,So then, again,

what is going up???what is going up???

It is not yourIt is not yourmoneymoneythat is going up butthat is going up butthethe

4.954.95


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9.649.64


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34.2934.29


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63.9263.92


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99.9599.95


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It is theIt is the

pricespricesthat arethat aregoinggoing

up!!!up!!!

264.98264.98


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And again, that isAnd again, that is

becausebecause the value ofthe value ofyour money isyour money is lessless

than it was before.than it was before.Your money is goingYour money is going downdown..

Down, down, downDown, down, down

I cant stand it anymore! My dollar

used to buy ten loaves of bread!!!


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What are some of the causesWhat are some of the causes

of inflation?of inflation?DemandDemand--pullpullToo much consumerToo much consumerbuying to meet supply, resulting inbuying to meet supply, resulting in

shortages.shortages.CostCost--pushpushCost of labor goes up.Cost of labor goes up.

WageWage--price spiralprice spiralWorkers wantWorkers wantmore wages and this drives upmore wages and this drives upprices. This then drives up wagesprices. This then drives up wages

and it just keeps going on up.and it just keeps going on up.


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The losersThe losers The winnersThe winners

Savers.Savers.

The moneyThe money

they put inthey put inthe bank nowthe bank nowwill be worthwill be worth

lessless laterlaterwhen theywhen theywithdraw it.withdraw it.

BorrowersBorrowers..

The money theyThe money they

borrow now willborrow now willbe paid backbe paid backwith moneywith money

worthworth lessless thanthanwhen it waswhen it wasborrowed.borrowed.


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This is more significant than

you think. Answer thisquestion

Who borrows the mostmoney in our country?

The answer should tellyou a lot!


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Whup! LooksWhup! Lookslike morelike more

inflation on theinflation on theway Errgh!!!way Errgh!!!

What can you do about it?What can you do about it?

Lots!Lots! Stay tuned!Stay tuned!


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But for nowBut for now

Remember,Remember,thethe valuevalue ofofyour moneyyour moneyis really justis really just

what we allwhat we allthinkthink ititshould be.should be.


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What the government (and all ofWhat the government (and all of

us!) really wants it to be likeus!) really wants it to be like

=Money out there Pr oductive capacity


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Dont forget!Dont forget!

ThisThis

is just allof usis just allof us

working hard toworking hard tomake things thatmake things that

willmakewillmakepeoples livespeoples lives

mater

ially b

ett

er!mat

eria

lly b

ett

er!

And how do wemeasure this?

Yes!Gross

DomesticProduct!


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What the government (and all ofWhat the government (and all of

us!) really wants it to be likeus!) really wants it to be like



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If there is a lot of moneyIf there is a lot of money

out there (in a sense,out there (in a sense,moremore than the matchingthan the matching

production capacity)production capacity)

Theimage cannotbe displayed.Your computer may nothaveenough memory toopen theimage, or theimagemay havebeen corrupted.Restartyour computer, and then open thefileagain.I fthe red x stillappears, you may havetodelete theimage and then insertit again.


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Then there isThen there is

inflation.inflation.



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If there is less of that $$$If there is less of that $$$out there, then it isout there, then it is

valued more.valued more.


But again, there cant too few of these out there!


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Once againOnce again

We want these to be equalWe want these to be equal



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But what if theres too muchBut what if theres too much

money out there?money out there?

=


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Yep! You have inflation!Yep! You have inflation!

=


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Indeed, this isIndeed, this is the mainthe main cause of inflation:cause of inflation:

Too much money in the economy.Too much money in the economy.

=


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So the government will try to takeSo the government will try to take

money out of the economy!!!!!money out of the economy!!!!!

=


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money out of the economy!!!!money out of the economy!!!!

=


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=




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=




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=




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And hopefully it will be back toAnd hopefully it will be back to

what we want it to bewhat we want it to be

=

But be careful! Look!


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There may beThere may beunemployment!unemployment!Why?Why?

It is because companies nowIt is because companies now

havehave lessless money to pay theirmoney to pay theirworkers. Companiesworkers. Companies borrowborrowmoneymoneyto help their production!to help their production!

(Pinkslip)


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And because we live in aAnd because we live in a debtdebt--based societybased society (everyone(everyoneborrowing), companies rely onborrowing), companies rely onborrowed money to sell theirborrowed money to sell their

products!products!

(Pinkslip)


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And when they cant sell theirAnd when they cant sell their

products, guess what theyproducts, guess what theyhave to do? Yes! They havehave to do? Yes! They haveto say Youre fired! a lot!to say Youre fired! a lot!

(Pinkslip)

Youre

fired.

Im sorry that Im

just not worthy,Mr. Trump.

*#&@%#

you fathairdo-

challenge

d

*#&@%#


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What kinds ofWhat kinds of

unemployment are there?unemployment are there?1.1. FrictionalFrictionalPeople arePeople are

between jobs.between jobs.2.2. StructuralStructuralJobs are noJobs are no

longer needed.longer needed.3.3. SeasonalSeasonalJobs may beJobs may be

available only at certain times.available only at certain times.


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More kinds of unemploymentMore kinds of unemployment

4.4. TechnologicalTechnologicalMachinesMachinesreplace people.replace people.

5.5. **CyclicalCyclicalThe overallThe overalleconomy changes.economy changes.

ExpansionExpansiongrowth, prosperity.growth, prosperity.RecessionRecessiondecline in economy.decline in economy.

Major recession is aMajor recession is a dedeppressionression..


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What happens if theWhat happens if the

unemployment rate gets up tounemployment rate gets up to

8%?8%? 10%? 15%?10%? 15%?Yikes!Yikes!


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Remember this?Remember this?

We want these to be equal.We want these to be equal.

=


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But if there is too little moneyBut if there is too little money

there, then there isthere, then there isunemployment! Errgh!unemployment! Errgh!

=


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There is something thatThere is something that maymay

happen here. Do you knowhappen here. Do you knowwhat it is?what it is?

=


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=

How aboutHow about


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How aboutHow about

=


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=

How aboutHow about


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=

How aboutHow about


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Th th t ddTh th t dd


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Then the government may addThen the government may addmore money to keep up with it!more money to keep up with it!

=


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But it is a difficult balancing act.But it is a difficult balancing act.

We will discuss more on thisWe will discuss more on thiswhen we go to Monetarywhen we go to MonetaryPolicies.Policies.

dontdont be impatient.!be impatient.!

Inflation and Unemployment Final

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