What’s Up?

1. What’s Up? Inflation A rise in the average price level

2. Painfully high gas prices!

3. How does the government know if the average price level is up? • They send people to the store to check. • Consumer Price Index. Measures price changes in commonly purchased items. June $150 $165 Dec $180

4. How to calculate the rate of inflation as a percentage Rate of inflation = Difference between 2 index #’s Divided by the 1st # given x 100 • Assume the CPI in 1998 was 145 and in 2000 it was 164. What was the inflation rate during this time period? • 164-145 , 145 • 19_ 145 x 100 = 13 % • Could you expect your income to go up by 13% in 2 years? • If you made $35, 000 in ’98, how much would you need to make in 2000 just to maintain your same standard of living? • 13% x $35,000 = $4,450 (that’s how much of a raise you need) or you need to make $39,450 in 2000.

5. What causes prices to go up? • Good Question! • Demand-Pull Inflation • Occurs when the total demand for goods and services exceeds total supply or when the government prints “too much money” • Cost-Push Inflation • Occurs when businesses raise prices in response to higher resource costs (raw materials, energy, wages) • What would happen if a government let their money supply get out of control? • “too much money chasing too few goods”

7. Germany’s Money Supply • In 1919 Germany had 50,000 marks (millions of marks) in circulation. • In 1923 Germany had 496,000,000,000,000 marks (in millions) in circulation.

8. 500 Mark, Aluminum Would buy 1 dozen eggs or a pound of flour.Bread is 700 Mark a loaf.

9. “Hans, would you run to the store and get a loaf of bread? Here’s a billion marks.” 1 Billion Mark, October 20, 1923 Reichsbanknote Would buy ¾ Pound of Meat, 3 eggs or 1/6 Pound of ButterBread is 670 Million Mark a loaf.

10. 100 Billion Mark, Nov. 3 1923 City of Freital On November 1 100 Billion Mark would buy 3 pounds of meat.Bread is 3 Billion Mark a loaf.On November 15 100 Billion Mark would buy 2 glasses of beerBread is 80 Billion Mark a loaf.

11. Prices were changing so fast that in a café, people would order at one price and have to pay a higher price on their way out. • Printing presses only printed on one side of a bill so they could print faster. • One egg cost .08mark in 1914 and 80 billion marks in 1923

12. TOP 100 AMERICAN FILMS (Unadjusted) Titanic (1997) Star Wars: Episode IV - A New Hope (1977) Shrek 2 (2004) E. T. The Extra-Terrestrial (1982) Star Wars: Episode I - The Phantom Menace (1999) Pirates of the Caribbean: Dead Man's Chest (2006) Spider-Man (2002) Star Wars: Episode III - Revenge of the Sith (2005) The Lord of the Rings: The Return of the King (2003) Spider-Man 2 (2004) The Passion of the Christ (2004) Jurassic Park (1993) The Lord of the Rings: The Two Towers (2002) Finding Nemo (2003) Spider-Man 3 (2007) Forrest Gump (1994) The Lion King (1994) Shrek the Third (2007) Transformers (2007) Harry Potter and the Sorcerer's Stone (2001) The Lord of the Rings: The Fellowship of the Ring (2001) Star Wars: Episode II - Attack of the Clones (2002) Pirates of the Caribbean: At World's End (2007) TOP 100 AMERICAN FILMS (Adjusted) Gone With the Wind (1939) Star Wars: Episode IV - A New Hope (1977) The Sound of Music (1965) E. T. The Extra-Terrestrial (1982) The Ten Commandments (1956) Titanic (1997) Jaws (1975) Doctor Zhivago (1965) The Exorcist (1973) Snow White and the Seven Dwarfs (1937) 101 Dalmatians (1961) Star Wars: Episode V - The Empire Strikes Back (1980) Ben-Hur (1959) Star Wars: Episode VI - Return of the Jedi (1983) The Sting (1973) Raiders of the Lost Ark (1981) Jurassic Park (1993) The Graduate (1967) Star Wars: Episode I - The Phantom Menace (1999) Fantasia (1940) The Godfather (1972) Forrest Gump (1994) Mary Poppins (1964) The Lion King (1994) Grease (1978) Thunderball (1965)

13. The Inflation Calculator