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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Surplus
Supply Demand0
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Equilibrium
Supply Demand0
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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
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