Inflation

Inflation- A general rising level of prices. It reduces the "purchasing power"

Causes- Gov't prints too much money (the quantity theory) 

Demand- pull inflation- "too many dollars chasing too few goods 

Demand pulls prices upward 

Cost- Push Inflation 

Higher Production cost increases prices.

Standard Inflation Rate is 2-3%

Rule of 70- Used to calculate the number of years it will take for the price level to double at any given rate of inflation 

Deflation- Decline of the price level 

Disinflation- Occurs when the inflation rate itself declines

Nominal and Real Interest Rate( borrowing money) 

Real Interest Rate- The % increase in purchasing power that a borrower pays to the lender/ adjusted for inflation.

COLA- Cost of Living Adjustments, some works have salaries that mirror inflation. They negotiated wages that rise with inflation.