When the price of one or two things goes up, we notice. Whether we are paying more for gasoline or for a pizza, when the price of something we want to buy goes up, it makes us feel poorer. But what happens when the price of everything goes up? Are we even worse off? The answer to this might be surprising.
After completing this chapter, the student should be able to:
1. Explain the Consumer Price Index.
2. Define and calculate inflation.
3. Explain some of the problems that inflation may cause.
4. Explain the difference between deflation and disinflation.
5. Describe a theorized relationship between inflation and unemployment.
Introduction to Inflation
In Chapter 6, we talked about the equilibrium price of ...