Ch+13.2+Outline

__The Effecting Of Rising Prices__ __Price Indexes__ __Causes of Inflation__ __Effects of inflation__
 * Inflation is a general increase in prices, over the years prices rise and fall but in america economy they mostly risen
 * Purchasing power is the ability to purchase goods and services. as prices rise, the purchase power of money declines.
 * a price index is a measurement that shows how the average price of a standard group of goods changes over time.
 * the consumer price index (CPI) is computed each month by the Bureau of Labor statistics
 * market basket is a representatives collection of goods and services
 * Inflation rate is the percentage rate of change in price level over time
 * hyperinflation is inflation that is out of control
 * quantity theory of inflation states that too much money in the economy causes inflation
 * demand pull theory states that inflation occurs when demand for goods and services exceeds existing supplies
 * cost push theory inflation occurs when produces raises in order to meet increased costs
 * wage price spiral is the process by which rising prices cause higher wages
 * in an inflation economy a dollar will not buy the same number of goods that it did in years past
 * fixed income is the income that does not increase even when prices go up
 * people receive a given amount if interest on money in their savings amounts but their true return depends on the rate of inflation

__Recent trends__
 * deflation is a sustained drop in the price level

Questions 1-6
 * 1) inflation affects purchasing power because prices go up and down in an inflation
 * 2) the purpose of CPI is too is to calculate the amount spent and made in the last month
 * 3) inflation causes wage price spiral, because the price rises
 * 4) because the unemployment levels have never been that low, and well jobs try to find good workers but they ask for high wages
 * 5) 2.17%
 * 6) i'd probably go crazy because no one wants to lose money, it sucks just pumping gas